BUY IT; BIN IT: The construction shares to snap up - and those to ditch
Each week in our new column an investing expert delivers their verdict on a pair of shares - one that may be worth buying and one that it may be better to shun.
These are investing ideas meant as a starting point for your own research, not personal recommendations.
Whether to buy or sell a share or fund is a decision only you can make based on your own personal situation and careful research. Each share is linked to our company data pages, where you can start to look through the figures and latest reports.
If you are unsure about investing then you should seek independent financial advice.
BUY IT: Kier is developing the Greenwich Peninsula where more than 10,000 homes will eventually be built
BUY IT: KIER GROUP
Kier Group is a business that’s thriving where many of its competitors are flailing.
It’s a FTSE 250 company that deals in construction, property and support services, such as motorway maintenance.
While many firms in these industries are seeing squeezes on their margins, Kier’s are steady and the company is benefiting from increased government spending on housing and infrastructure.
The business also took over rival firm May Gurney last year, which has increased its order book and work flow substantially.
On top of that, the dividend yield is a very attractive 5 per cent. The share price has fallen somewhat this year, to around £14.50 per share, but prospects for the company look good and its peak price of £19 could be attainable again.
BIN IT: BALFOUR BEATTY
Struggling: Balfour Beatty share price has fallen from 230p to 163p in just three months
The construction stalwart is having a tough time.
It has put out five profit warnings over the past five years and rejected a takeover bid this summer, which leaves it struggling to sort out its business.
The UK construction arm in particular is flailing, with deep divisions among management and losses mounting.
The group has appointed auditing firm KPMG to conduct an independent review to find out what’s going wrong - that should be published by the end of the year.
Balfour has historically been a big dividend payer but, as its woes continue, that is likely to be reduced at best or scrapped at worst.
The share price has fallen from 230p to 163p in just three months.
A deal to sell the U.S. division is akin to selling the household jewels - it may bring in some money in the short term, but it’s the most profitable part of the business.
Shareholders and City analysts have lost confidence in the firm, which seems to have lost its way.
A new chief executive has been appointed to help turn around the business, but he doesn’t start until the end of January, and it could be too little, too late.
Views this week from Neil Craze, investment manager at Redmayne Bentley
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