MoneyWeek’s comprehensive guide to this week’s share tips Four to buy
Babcock International
Shares
This engineering-services group has endured a fraught few years but is now embarking on “a major recovery”. Disposals have refocused the business on the defence sector, an area now comprising 66% of group sales. Babcock’s know-how in marine engineering and nuclear submarine maintenance will be in strong demand as the Ministry of Defence concentrates on rising global threats. On a 2024 price/ earnings (p/e) ratio of 8.5, the shares trade on a discount to defence-sector peers and could rerate as margins recover. 329p
Direct Line Insurance
Interactive Investor
Fierce competition in the motorinsurance market recently pushed shares in this insurer to an all-time low, but this sector might finally be bottoming out. There could well be more stockmarket volatility to come. Yet eventually investors should price in a recovery for 2024, and the firm could also attract takeover interest as “tough competition” prompts industry consolidation. A risky buy. 158p
Greencoat UK Wind
The Mail on Sunday
This renewable-power business runs 45 wind farms both onand offshore that collectively generate enough electricity to power 1.8 million homes. The stock has delivered “ten years of consecutive, inflation-linked dividend increases”. With the government still committed to building out “home-grown, renewable energy”, there should be more upside for London’s biggest listed wind play. 158p
JD Sports Fashion
The Sunday Times
“Retail corpses” are piling up, but this seller of fashionable trainers is a rare success story. It plans to invest up to £3bn over the next five years on 1,750 new stores across the US and
Europe. The group is helped by its “sweet-spot demographic” of cash-rich “young, employed” and mortgage-free customers, as well as close relationships with major sportswear brands. Pretax profits could double in six years. On a discount to historic averages, the shares are the perfect way to buy into the trend for all things athleisure. 160p