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Questor: In a growth-and-inflation world, this share could run higher still
Shares in PageGroup, the recruitment specialist, stand some way above their low for the year of 265p but are even further from their 12-month high, north of 500p.
If markets maintain their faith in the growth-and-inflation trade, the FTSE 250 stock has the potential to run higher still.
Net cash on the balance sheet and a decent dividend yield could offer some protection against large falls, while the firm has in the past paid special dividends too.
After the initial Brexit-inspired panic, earnings forecasts have begun to creep higher again at Page, which has operations in 35 countries, a spread that should also provide valuable diversification.
Britain generated a quarter of gross profits in 2015, but Europe and the Middle East provided nearly 40pc, Asia 20pc and America the rest.
Sterling’s weakness flattered October’s third-quarter numbers as reported gross profit rose by 14pc, while the underlying figure rose by just 1.3pc, with the UK, Asia and the US all slipping and Europe taking up the slack.
The chief executive, Steve Ingham, flagged uncertainty in Britain and China as challenges but the share price slide and consensus forecasts of just 2pc earnings growth for 2016 and a 5pc fall in 2017 suggest that a lot of bad news may already be factored in.
A forward price-to-earnings ratio of nearly 17 for this year and a little more for next does not immediately suggest a bargain, but the firm will be sensitive to any economic acceleration and looks inexpensive relative to its own historic valuation trading ranges.
The shares could be choppy, but the balance sheet provides some welcome protection.
Questor says: hold
Ticker: PAGE
Savannah Resources
Markets are currently embracing president-elect Donald Trump in the hope that his policies can breathe life into a US economy that continues to grow at a rate well below pre-crisis trends.
Only time will tell whether he can but for the moment reflation is in vogue and the price of copper is responding, to the potential benefit of the miner Savannah Resources.
The stock, whose market value is just £19m, is suitable only for aggressive, risk-tolerant investors willing and prepared to accept losses, as the company currently generates no revenues.
However, October’s exploration results from two blocks in Oman look exciting. Production is due to start in late 2017 and the timing could be propitious as copper is back above the $5,500-a-ton mark.
Clear risks remain, but the quality of the copper is high.
Questor says: speculative buy
Ticker: SAV
Update: Wm Morrison
The latest monthly sales data from Kantar Worldpanel suggests that there may finally be some light at the end of the tunnel for the hard-pressed supermarkets sector.
Twelve-week UK grocery sales rose by 0.8pc year-on-year for the second month in a row as price deflation fell to just 0.5pc, down from the 1.5pc average experienced in the first nine months of the year.
This is not to say it is all plain sailing for Wm Morrison, whose sales fell again, but the Bradford-based firm’s market share improved slightly to 10.5pc in the month as Aldi and Lidl’s combined share dropped (if only fractionally) for the first time.
In fairness, Tesco’s numbers looked the best of the big three, relative to Morrisons and Sainsbury’s, but Morrisons looks to be the cheapest on an asset valuation basis and the stock where expectations for a recovery look to be the lowest, despite the good start made by the new chief executive, David Potts. There is a long way to go but the news is starting to improve for the industry as well as the company.
Questor says: buy
Ticker: MRW
Update: B&M European Retail
Like-for-like-sales growth of 0.2pc does not set the pulse racing but strong new store openings and increases of 19pc, 17pc and 19pc in sales, underlying pre-tax profit and the dividend respectively mean that last week’s interim results from B&M European Retail offer plenty of encouragement.
The shares are now up by nearly 10pc since they were first tipped here three weeks ago. Cash flow is strong and the firm could potentially come up with another special dividend.
Questor says: speculative buy
Ticker: BME
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