Thursday tips round-up: Home Retail, Drax, Carillion

22nd Oct 2009 06:00

Home Retail Group, the owner of Argos and Homebase, is well placed to benefit from a sustained upturn in consumer spending. When this comes, it represents a safe pair of retail hands in the long-term. The valuation remains a concern, but given that Mervyn King, Governor of the Bank of England, is beginning to see signs of recovery, the Independent will hold, at least for the moment.However, the Times thinks there can be few retailers as exposed as HRG to lengthy sterling weakness ? it lacks the foreign-denominated earnings of, say, Kingfisher or the well-cushioned margins of a fashion retailer. With HRG's shares at 17 times next year's earnings, there are cheaper ways to bet on recovery. Pass.The fact that Drax shares are pretty cheap, trading on a 2010 price earnings ratio of 6.2 times, is rather compelling. The company's trading update yesterday conceded that trading conditions remain tough. Indeed, the Independent would be nervous about the performance of the stock in the next 12 months, but investors cannot ignore such a juicy yield. Buy.The Telegraph's Questor believes that the market has got the valuation of Carillion's business wrong. The earnings multiples for the next two years fall to 7.5 then 7.3 based on current forecasts. This is a silly valuation for a growing and profitable business. Now is a great time to buy before the market wakes up to the Carillion story - and you can lock in a decent yield as well. Buy.Publishing group Pearson raised it full-year forecast this week after a strong nine-month performance, especially in its US education business. Upgrades to consensus forecasts are likely, probably by about 4pc, and so the stance on the shares remains buy, says the Telegraph.Telford Homes does lots of social housing around the East End of London, a place where it's desperately needed. With the possibility of spending cuts to come and maybe a Conservative government with an inclination to land the cuts on poor people who don't vote for them, it's a sell. Right? Well, maybe. The business does have headwinds in the face of spending cuts. But with demographics in its favour and a proven record, it's a long-term buy, says the Independent.Burford Capital is the new kid on the block and will have to compete with Juridica Investments, which listed on AIM in 2007, Credit Suisse and Allianz, amongst others, to unearth potentially successful cases that have the best possible rate of return. With much to prove that rates of return of at least 30 per cent can be achieved, hold the shares for now, says the Times.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.