MoneyWeek’s comprehensive guide to this week’s share tips Five to buy
Coats
Investors’ Chronicle
This 268-year-old thread maker is still “surprisingly nimble”. It’s managing to push through price increases and productivity improvements to keep it ahead of inflation, helped by its focus on the more expensive end of the clothing market. There are long-term growth opportunities in footwear, sustainable and recycled products, and “performance materials” for specialist applications, including fibreoptic cables and cars. Market pessimism has left the shares on a price/earnings (p/e) ratio of just nine times forecast earnings from 13 a year ago, which “feels short-sighted”. 71p
Grainger
Shares
Grainger, one of Britain’s biggest professional landlords, has a portfolio of roughly 10,000 homes, with 7,000 new build-to-rent homes also in the pipeline. The property market is in for a bumpy ride, but that is reflected in the price: on a priceto-book ratio of 0.99, the shares trade below historic levels. Ultimately, the outlook for rentals remains “exceptionally strong” given the structural shortage of housing, and rising mortgage rates that will push more households into renting rather than buying. 256p
Hertz
Barron’s
Hertz has changed a lot since its 2020 bankruptcy filing. Once notorious for launching cash-burning price wars with competitors, today’s Hertz is more disciplined, “highly profitable” and committed to shareholder value, having bought back over 30% of its stock since it emerged from bankruptcy in 2021. The group’s rapid adoption of electric vehicles is paying off in the form of higher rental prices and lower maintenance costs than for traditional internal combustion engines. With the shares on eight times projected 2023 earnings, “it’s worth taking a ride”. $18.67
Bellway
The Telegraph
Earnings forecasts for this housebuilder have fallen sharply. The first-half trading update revealed a 29% drop in its order book and a 32% decline in reservation rates. Expectations are low. “Cyclical stocks such as house builders don’t tend to wait for good news. They start to run when it becomes less bad.” So it was encouraging to hear that reservations in January are higher than those seen at the end of last year. “Keep building a position.” 2,149p
Pearson
The Times
This education publisher appears “blissfully ignorant” that it’s likely to be a takeover target, despite fending off three private-equity bids from Apollo last year. It has growth potential in a defensive market. Forecast earnings per share of 58p in two years are “respectable” and a forecast p/e ratio of 15.3 is “undemanding”. It all looks attractive enough for Apollo or somebody else to try taking it out again once the outlook improves. At this price, “the bid hopes are in for free”. 906.2p