Sunday newspaper share tips

By THIS IS MONEY
Updated:

 

Each week, we round up the main share tips from the Sunday newspapers.

Pile of newspapers

Read Financial Mail's Midas share-tipping column, HERE.

Sunday Telegraph

Shares in the UK's only listed funeral director, Dignity, outperformed the market when investors were looking for safe stocks in the financial turmoil.

However, a return in the appetite for risk means Dignity has retreated from its recent high, giving investors the opportunity to buy into the stock at a sensible level.

Shares are currently at 538p but Goldman Sachs recently added the company to its buy list with a six-month target of 740p. Trading continues to show slow but steady growth.

While it does have a large amount of debt to service, it appears that Dignity's model of snapping up smaller, independent operators and driving efficiencies and synergies is a sound one.

Shares in investment trust Templeton Emerging Markets have risen 30% since early January, compared with the FTSE 100 Index which is down 3% over the same period. The three largest shareholdings are in Brazilian companies - banking groups Unibanco and Banco Bradesco and mining group Vale - followed by firms in Turkey and South Korea.

All of the companies appear to offer exciting growth prospects, significantly better than many of their UK listed peers. The newspaper regards emerging markets as a strong long-term bet for UK investors and recommends the fund as a core holding in any portfolio.

Randgold Resources, the West Africa-focused gold miner, said last week that its Gounkoto prospect in Mali was 'shaping up as a significant new discovery', with the grades seen in recent drilling some of the highest recorded in the company's history.

It prompted Citigroup to upgrade its stance on the shares to buy from hold, arguing that the company had an unmatched production growth in the sector. The broker forecast that Randgold will double production levels over the next three years to more than 750,000oz. It also noted that the company had sufficient resources to develop its projects.

Prospects for Randgold depend on the outlook for the gold price, but shares remain a buy at 3653p.

Mail on Sunday

With the intoxicating mixture of round-the-clock dealing, playing at the margin and any winnings free of tax, is it hardly any wonder that IG Group along with the rest of the online trading and betting industry has seen explosive growth. But you can have too much of a good thing.

Volatility on an unprecedented scale last year saw punters overwhelmed. Positions could not be closed quickly enough, investors crashed through stop-loss limits and bad debts spiralled as people refused to pay up. This resulted in large bad debts for IG Group, a profits warning and a share price crash of 30%.

But the management has adopted a more cautious approach towards client credit risk since then. This has cut doubtful debt charges for the past quarter from the 11.6% of revenues at which they were running for the first half down to less than three per cent.

The big growth opportunity for IG Group is in international markets. Income outside the UK has grown from six per cent of revenues in 2005 to 27% in 2008 and, with the US opening up to more online dealing, I would expect international markets to become even more important to the company.

The shares have been caught up in the recent market strength and have risen from 200p to 243.25p. At a price of 220p, which I would set as an entry price, they are on a price-toearnings ratio of nine for the year to May 2010 and yield just over six per cent.

That sort of yield backed by cash in the bank compares very well with the returns obtainable on the High Street.

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