Friday tips round-up: Smith&Nephew, Asos

6th Jun 2014 08:32

A bid for Smith&Nephew does indeed seem possible, at least according to market pricing. Should a 'knockout' bid finally come through, that could send the stock as high as £15, or should one fail to materialise, as low as £9. Closing yesterday at £10.89 the current stock price seems to be implying about a 50% chance that some sort of bid will indeed appear - not a bad guess. However, despite yesterday's gains it is unlikely to come from US outfit Medtronic, who was reportedly the third potential party interested in the British firm, alongside Stryker and Johnson&Johnson. Simply said, buying Smith&Nephew exclusively on the basis of potential tax savings does not seem to make much sense. On the other hand, the medical device maker is seen as a laggard in product innovation and is losing market share in areas such as knee implants. Hence, should a formal offer be tabled there would be pressure on management to talk. Nevertheless, the shares are already trading well above their value as a standalone business, so "less patient investors might want to take a bit of profit," writes The Times' Tempus.Size helps, on the internet or off. Digital outfits with larger customer bases, better-funded infrastructure, and richer data should have an advantage, which ought to be duly reflected in their valuations. Yet after growing its top line at an average rate of 50% over the last five years, to reach £1bn in annual sales, growth seems to be getting harder to come by at online retailer Asos. As well, management's contention that some discounting will not harm the business model does not ring true. While it may be easy to lower one's prices, it's quite a different thing to later try and raise them again, as any UK food retailer can attest to. Furthermore, the fashion sector has its own dynamics and how those will play out in the internet remains uncertain. Like all so-called 'growth' stocks the multiple on the shares will compress and the internet cannot stop that, says the Financial Times' Lex column. 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.AB