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05 December 2019

Redmayne Bentley’s Top Trades

Below, we take a look at the most frequently traded shares through Redmayne Bentley over the last couple of weeks and consider why they have been so popular.
  
BRITISH AMERICAN TOBACCO (BATS)
Index: FTSE 100
Sector: Tobacco
Market Capitalisation: £68,242.42m
 
Amid the publicity storm regarding the dangers of vaping, British American Tobacco reported good full-year 2019 results; revenue growth is expected to fall in the upper half of the 3-5% guidance, while operating margin saw an improvement of 50-100bps. Future success hangs on the regulatory environment of a product whose health effects are virtually unknown. Nonetheless, the shares have performed robustly over the past year, up 24% year-to-date, while still yielding an attractive 6.5%. Moreover, priced at 11x P/E, shares are looking decent value for money.
 
 
COMPASS GROUP (CPG) 
 Index: FTSE 100
Sector: Restaurants & Bars
Market Capitalisation: £29,276.02m
 
The world’s largest caterer reported solid full-year results for 2019; profits and revenues have increased, while EPS and free-cash flow have also seen solid growth. However, while remaining a well-diversified company, Compass Group has witnessed a downturn in European markets, which has seen volumes and margins drop, causing profits to fall, and resulting in a restructuring charge of £300m. The group seems to be in a period of change, with disposals and bolt-on acquisitions playing a big part in the reshaping of the portfolio, which aims to sharpen its focus on food. Overall, shares are still looking expensive on 27x P/E but remain up 15% year-to-date.
 
ROYAL MAIL (RMG)
 Index: FTSE 250
Sector: Delivery Services
Market Capitalisation: £2,205m
 
Royal Mail recently updated shareholders on its half-year performance, warning of a potential loss for its UK business in 2020. Moreover, the group forecasts UK letter volumes to drop by 9% in the second-half of 2019. This contrasts with the more positive news which emerged in early November, after Royal Mail won a High Court injunction to prevent staff striking over the Christmas period. Revenues climbed 5.1% to £5.2bn, pre-tax profits jumped to £173m from £33m. Nevertheless, the above, together with the threat of Labour re-nationalising Royal Mail, has hit the share price, down 21% year-to-date, with the stock now trading on 6x P/E.
 
Top Trades is published every fortnight in Equity Insight, a newsletter written by our stockbrokers and investment managers. It provides market commentary, a focus on individual sectors, technical analysis, potential trading opportunities and share reviews.
 
Please note that investments and income arising from them can fall as well as rise in value and you may lose some or all of the amount you have invested. Past performance and forecasts are not a reliable indicator of future results or performance. Please note that this communication is for information only and does not constitute
Redmayne Bentley’s Top Trades

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