Three shares to buy
Any company that can find a way to transport gas from places where it is cheap to Europe, where it is eye-wateringly high, “can make a fortune”. Golar LNG is a small US company that owns two of the world’s five floating plants for the conversion of natural gas into liquefied natural gas (LNG) for worldwide shipping.
These plants, called FLNGs, are in short supply, implying scope for huge profits. Golar offers a “neat way to share in the fruits as free enterprise seeks novel ways to counter Putin’s gas blockade”. $27
The Mail on Sunday
Iodine deficiency is the principal cause of brain damage. Aim-listed Iofina produces iodine and sells it around the world, having perfected a way of extracting the substance from brine left over from oil and gas production – a more eco-friendly method than removing it from the Atacama desert in Chile.
Iodine is used in everything from healthcare to nutrition to technology, yet supply is limited. This has sent prices to record highs of $70 per kilogram. The firm is profitable and the balance sheet is strong. 23p
The Sunday Times
Americans are spending less on iced tea, which is made with flavour-maker Treatt’s ingredients, while rising inflation and lockdowns in China have also dented profits.
However, Treatt’s natural flavourings are tapping into the shift towards healthier food and mounting distrust of sugar and artificial flavourings, while the “margin-squeezing” factors will not last forever. This solid company looks a good long-term investment. 625p
Two shares to sell
DFS Furniture’s shares have slid by almost 50% this year. Investors expect earnings will continue to slip, but it remains unclear “just how badly” households will cope with increasing energy bills “and higher shop prices this winter” – and in turn to what extent they will be cutting back on furniture as the cost-of-living crisis bites.
As a result, management has set out a “gaping profit guidance range” for the year to 26 June 2023. Pre-tax profits could be anywhere between £20m and £54m, down from £60.3m last year. The retailer has set out three different scenarios: a decline in sales volumes of 5%, 10% or 15%.
The annual dividend, meanwhile, has almost halved and given the group’s poor earnings prospects it is unlikely to recover soon. The shares may need to fall further to take account of the risks ahead.
The operator of Wagamama, Frankie & Benny’s and Brunning & Price reported surging sales for the 26 weeks to 3 July. But that was after a pandemic-stricken 2021. Sales were still £100m down on pre-Covid levels, and trading has weakened in key areas.
Wagamama, whose new UK sites are highly profitable, posted weak growth, and pub revenue growth also fell back; concession sales shrank over the summer. The company said this was due principally to airline disruption and the impact of heatwaves over the summer. “Whatever the case, this is a mixed top-line performance.”
The £7m acquisition of Mexican fast food restaurant Barburrito looks a good move as consumers trade down owing to cost-of-living pressures, but the overall sector is in for a bumpy ride, as highlighted by the choppy results. Investors should sell. 44p
…and the rest
Fever-Tree Drinks has been buffeted by higher glass costs and supply-chain disruption, while poor cash generation also suggests the current rating of 40 times 2023 profits is too high. Sell (1,059p). Corporate broker Cenkos Securities has been hurt by the downturn in equity markets. Investors should expect a far lower final dividend this year thanks to greatly reduced pre-tax profits. Sell (55p). A worsening economic outlook bodes well for insolvency practice Begbies Traynor. Buy (142p). AstraZeneca’s strong pipeline of oncology drugs and record of healthy shareholder returns makes it an appealing defensive stock. Buy (10,328p).
The Mail on Sunday
Central Asia Metals’ stock has fallen in recent months alongside metal prices, but the dip is a buying opportunity. It is a well-run company with a solid dividend track record. Buy (228p).
French drinks group Pernod Ricard is trading at a “not-to-be-missed discount” to its UK rival Diageo in price/earnings (p/e) terms. This is an attractive entry point into a “high-quality, prodigiously cash-generative company” with a portfolio of “prestigious brands”. The shares are a buy (€193).
Advanced Medical Solutions’ share price has de-rated to 25 times its forecast earnings, which factors in inflation raising its costs and higher research and development expenses. The shares should rise if the group spends its cash boosting its global footprint. Buy (271p). Engineering giant Renishaw’s shares have fallen by 50% since last year’s record high and trade at an overly “pessimistic profit multiple”. High margins and steady revenue growth could spur a recovery. Buy (3,506p).