Thursday tips round-up: Alliance & Leicester, GlaxoSmithKline, Ladbrokes
Could 2008 be the year Alliance & Leicester is finally bought? The latest suitor for A&L - the subject of perennial takeover rumours from the moment it demutualised 10 years ago - has emerged as Spain's Santander.
The shares are no longer cheap after yesterday's 106p rise to 754p, trading on 10 times downgraded earnings. A bidder could wring out greater profits, though, affording it a slight premium. In addition, the 7.8pc prospective dividend yield remains tasty. Short positions in the stock are likely to be unwound in the next few days, pushing the shares down in the short term. So buy for a bid, but be prepared for a bumpy ride, writes the Telegraph.
GlaxoSmithKline needs to rebuild confidence in its second biggest-selling drug, Avandia, a diabetes treatment, after reports linking it to heart attacks. Moves to obtain approval in the US for the sale of Cervarix, a cervical cancer vaccine, have been delayed.
Despite these problems, GSK remains the ideal defensive stock in times of financial trouble. At current prices and 15 per cent below its best 2007 levels it trades on just under 13 times 2008 earnings, and underpinned by healthy cash flow remains one of the more attractive stocks in the market, says the Independent.
Ladbrokes trades on around 12 times this year's earnings, a premium to William Hill that is justified given its innovation and expansion both overseas and online. Nevertheless, despite the strong cash generation, the stock looks fully valued given recent developments and is best avoided, writes the Telegraph.
(Article continues below)Advertisement
If supermarkets decline to let their customers absorb the brunt of rises in everyday products such as bread and biscuits caused by dearer commodity prices, then the buck will stop with suppliers such as Northern Foods. At the very least higher selling prices could reduce sales.
All this comes as Northern appears to be on the cusp of a real recovery. The new chief executive, Stefan Barden, has cut costs, and engineered a strong performance from the chilled business and a return to profitability in its bakery division, while steps are underway to improve the pastry and grills business. Even so, the shares have lost 19 per cent of their value over the past year. It is still too early to buy for recovery, says the Independent.
While post-Christmas trading is bound to level off there is sufficient new product in the marketplace to sustain strong sales for some time to come. Game remains attractive, says the Independent.
The Telegraph advises investors to hold for now, with an eye on taking profits if the shares break too far out of their current range.
Please note: Digital Look provides a round-up of news, tips and information that is impacting share prices and the market. Digital Look cannot take any responsibility for information provided by third parties. This is for your general information only as not intended to be relied upon by users in making an investment decision or any other decision. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information.
