Tempting Stocks?
Our ‘Tempting Stocks?’ commentaries offer a more in-depth assessment of predominantly large and mid cap stocks offering a thorough review of the business, financial statements, market outlook and valuation considerations. We pay particular attention to the balance sheet and cash flow and offer our usual forthright, objective views.
Advertising powerhouse with significant exposure to emerging markets
- Recent share price weakness could present a buying opportunity into results
- Strong emerging market exposure
- Valuation relative to peers
- Early cycle beneficiary of global economic recovery
- Strong management story
- Excellent generator of cash
BorgWarner (BWA) | Market cap £2.25bnGrowing demand for more fuel efficient engines could provide a massive boost
- Need to lower CO2 emissions is driving demand for group products
- Benefits from trend to diesel
- Restructuring nearly complete
- R&D 5.5% of sales and good margins
- Imposition of stricter mileage standards will benefit
Palm Inc (PALM:NSQ) | Market cap £1.1bnCurrent valuation looks mighty stretched!
- In what is becoming a saturated market they will surely struggle to compete.
- Lacking the financial muscle and killer product of others.
- It’s a $2bn one product company.
- 2011 estimates don’t look achievable.
- Valuation below publishing & broadcasting peers.
- Strong market share growth at SFR.
- GVT would gain entry to high growth market.
- Potential sale of NBC Universal.
- Highly cash generative.
- Valuation looks very pricey.
- What is the long term business model?
- High net debt.
- Lots of provisions established in last two years.
- Shares have soared over past 12 months.
- Interims flattered by….
- Placing at 425p in June 2009 raised £108m
- Power supply largely contracted over the next 12 months
- Attractive dividend yield, well covered
- Diversifying fuel.
- Strong presence in professional markets.
- Subscription, as opposed to advertising based.
- Placing out of the way.
- Senior management changes.
- Market-leading position.
- Superior product development muscle.
- Superior management.
- Hugely valuable brand.
- Vast cash pile.
- But, how fast can a company of this immense size grow?
- The author considers that Google is currently valued too highly!
- Excellent track record, solid strategy and conservative financials.
- Valuation currently does not look out of line.
- Biggest issue is the likely impact on earnings from reducing the fleet.
- Positive is that cash flow and finances should be ok, even if earnings take a dive.
- The clear difference in valuation between this UK Blue Chip and major peers looks overdone.
- Number 3 globally it has a delivered a consistent record of growth in the last 5 years.
- The dividend yield is currently nearly 5% and free cash generation has been excellent in recent years.
- Recent relative under performance is likely to be as a result of a short term switch from defensives to cyclical stocks.
- The value of shares can fall as well as rise.
- You run an extra risk of losing money when you buy shares in certain smaller companies including "penny shares".
- There is a big difference between the buying price and the selling price of these shares. If you have to sell them immediately, you may get back much less than you paid for them. The price may change quickly, it may go down as well as up and you may not get back the full amount invested. It may be difficult to sell or realise the investment.
- You should not speculate using money you cannot afford to lose.
- Some securities may be traded in currencies other than sterling, and may also pay dividends in other currencies. Changes in rates of exchange may have an adverse effect on the value of these investments in sterling terms. You should also consult your stockbroker about any additional dealing or administrative charges.
- We have taken all reasonable care to ensure that all statements of fact and opinion contained in our publication are fair and accurate in all material aspects.
- Investors should seek appropriate professional advice from their stockbroker or other adviser if any points are unclear.
- Our commentaries give general advice only, and the companies mentioned may not necessarily be suitable for any individual.
Vivendi (VIV) | Market cap £24bnExcellent cash generator
Rentokil Initial (RTO) | Market cap £2.1bnValuation looks stretched
Drax (DRX) | Market cap £1.8bnElectrifying performance?
Reed Elsevier (REL) | Market cap £5.8bnSuperb cash generator
Google (GOOG) | Market cap £90bnDominating its market and many of our lives
Aggreko (AGK) | Market cap £1.36bnFantastic track record but things have got a lot tougher
BAE SYSTEMS (BA.) | Market cap £12.2bnValuation difference to major peers looks overdone
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