Mindful Money’s weekly stock-tips: Sainsbury, L&G, G4S, Standard Chartered & Barratt Developments

6th May 2014


Investors will be keen to hear how Sainsbury is coping amidst the increasing competition engulfing the UK’s supermarket sector when it updates the market on Wednesday writes Philip Scott.

The business, reporting its full year results, has endured a 17% fall in its share price over the past 12 months partly as a result of the tougher trading environment which has seen the so-called hard-discounters including Aldi and Lidl gain further ground.

Analysts at Cantor Fitzgerald last week downgraded its position on the group to a ‘hold’, falling in line with the market consensus recommendation.

Wednesday’s update marks the last results announcement under outgoing chief executive Justin King. Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers highlights that full year pre-tax profit estimates have edged lower in recent weeks – down from the 5% plus growth at £796m to a 4% rise to £789m.

“This follows both the group’s first decline in like-for-like store sales in nine years and increased concerns for a price war given Morrison’s recent upping of its investment in lowering product prices,” says Bowman. He adds:  “Nonetheless, its shares have still outperformed UK rivals over the last month, with competitors considered more reliant on price than Sainsbury.”

Wednesday also sees, insurer Legal & General (L&G) deliver its latest interim management statement. After enjoying a 23% share price hike over the past year the broader sentiment has the stock labelled a ‘hold’.

But following the government’s shock announcement in its latest Budget where from 2015 pension savers will no longer be forced to buy an annuity with their pension pot, investors in L&G will want to know its position, although its annuity arm only accounts for some 2% of profits.

Sheridan Admans, investment research manager at The Share Centre, who for his part is calling the group a ‘buy’, says: “Investors will be looking for Legal & General to get a good start to the year after an impressive 2013/14. Additionally, an update on its overseas expansion plans will be worth noting.”

Troubled security giant G4S reports its first quarter trading update on Wednesday. With its shares down 22% over the past year and flat over the past three months, the group’s return to favour from the perspective of the UK government remains high on the agenda for investors urges Bowman. He adds: “The company’s recent awarding of business in relation to the government’s ‘Help to Work’ programme for the unemployed, along with other outsourcers, appeared to provide a step in the right direction.

“The group’s growing emerging markets business remains a feature, along with the accompanying and potentially adverse currency exposure, whilst the company’s balance sheet and the reduction of debt continues to be monitored. Ahead of the update, analyst opinion denotes a ‘hold’.”

Thursday sees Asian focused bank Standard Chartered come to the market with its latest interim management statement. The slowdown across emerging markets has hit the business, with its stock down 22% over the past 12 months and investors are unlikely to hear that these pressures have eased.

Admans, echoing the market consensus, rates the shares a ‘hold’ says, an update on the recently announced strategic review will be worth noting. He adds: “Other areas of interest for investors will be regulatory issues and the volatility of currencies, along with the individual performance of some of its more important Asian countries; Korea, Singapore and Hong Kong.”

House builder Barratt Developments also reports on Thursday. Its shares have surged by 20% over the past year on the back of the sustained momentum across the UK’s housing market and are still in ‘buy’ territory according to general analyst opinion however Admans rates the firm a ‘hold’. He says: “Going forward, the acquisition of more land banks and plots for development will be important and investors will expect to see increased levels of home sales and higher average prices. With the recent weather improvement and good news surrounding the UK economy, it will be of interest to investors to see the effects on footfall and construction.”


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