Sunday share tips: Aviva, Ibstock
The Financial Mail on Sunday's Midas column told readers to buy shares of Aviva, pointing out the recent share purchases by its chairman and the company's ongoing reorganisation which it said would pay dividends in the future.
As recently as 12 August, George Culmer, the chairman, purchased £420,000 more stock of the asset manager's shares as they neared their level from before the pandemic.
"A chairman's purchase of shares is almost always a positive sign, particularly when that chairman is as experienced as Culmer, a man who has spent decades in the financial services industry," Midas said.
Furthermore, Aviva's new chief executive officer, Amanda Blanc, had been refocusing the business on Canada, Ireland and the UK.
Those moves, said Midas, should allow Blanc to "invest more effectively in the business and generate decent returns."
Since arriving at Aviva in June 2020, she had also sold eight overseas units with the proceeds expected to reach £7.5bn by year end.
More important even, the firm's last interims showed the best general half-year insurance results in over a decade.
Thus, brokers are now anticipating a full-year dividend payout of 22.05p per share for 2021, rising to 25.36p in 2022.
There was also a "strong" chance that Blanc would return more than £4.0bn already promised to shareholders.
Indeed, activist investor Cevian was calling for a £5.0bn cashback.
The Sunday Times's Jim Armitage told readers to buy shares of Ibstock, pointing out to them the less-demanding valuation relative peers.
Shares of Volution had run up by about 90% year-to-date and was now trading on a price-to-earnings multiple in the 20s, while the sector had gained 13%.
Ibstock's shares on the other hand had only risen by 13%.
The reason? Investors had assumed that higher raw material costs linked to disruptions at Chinese ports and at home due to Brexit would hit the company's profits.
However, the company had been able to pass on those higher costs to clients.
Freight and labour costs were a potential problem and Ibstock had warned that they had become more acute and that profits would slow in the back half of 2021.
Yet some analysts believed the company was being too conservative and Ibstock had also cut overheads at an impressive pace.
"That will bring in juicier profit margins long after we’ve all stopped talking about Covid, Brexit and the HGV crisis," the tipster said.
"Shares in Forterra, a rival brickmaker and arguably the most similar stock market business, have gained 30 per cent this year. Ibstock should do the same. Buy."