5 Opportunities For The Week Ahead

Published in Investing on 27 July 2012

Some juicy prospects come our way next week.

The interim reporting season continues next week, with a number of FTSE 100 (UKX) and other companies offering half-year figures.

I've been feeling positive vibes from the results so far, and today I'm having a quick look at five companies reporting half-year numbers next week that could prove to be good investments over the next few years. You might want to do some homework ahead of their announcements.

Reckitt Benckiser

On Monday we'll have first-half figures from Reckitt Benckisser (LSE: RB), the company behind many well-known household products, including Air Wick, Calgon, Dettol, Durex -- and who can forget Cillit Bang, or even Colon sold in Spain and Israel, and Colin from India and Sri Lanka?

Reckitt Benckiser has a significant defensive 'moat', being so big it enjoys great economies of scale -- and it takes a lot to shift people away from their favourite brands.

Next week I'll be looking for some confirmation that the firm's track record of dividend growth is still intact. But we should also keep a check on the firm's global distribution, to see how emerging markets are comparing with the struggling eurozone -- though the firm's products are ones that people keep buying even when times are tough.

It could be a good time to buy, with the shares having been largely flat for the past couple of years. They now stand at 3,476p.


Tuesday brings results from automotive and aerospace engineer GKN (LSE: GKN), whose shares surged this month on the purchase of AB Volvo's aero engine division for £633 million. That said, at 207p, the shares are still down on the year.

The results come at a time of good prospects, spurred by growth in passenger and cargo traffic and by demand for the latest generation of fuel-efficient power units -- and with the new Volvo deal, GKN will be making parts for all of the world's major engine manufacturers.

There will be some new debt taken on to part-finance the deal, so a look at that will be in order on Tuesday, and we should also watch out for an expected hike in the interim dividend.

Even after the latest price advance, the shares are still only on a prospective price to earnings ratio (P/E) of 8 for the full year, falling to 7 for 2014 -- that's about half the long-term FTSE average. The rating looks like a steal to me.


Shire Pharmaceuticals (LSE: SHP) reports on Wednesday.

The 'blockbuster drug' approach pursued in the past by giants such as GlaxoSmithKline (LSE: GSK) and AstraZeneca (LSE: AZN) is losing its shine as generic copies of treatments become increasingly popular, and both those industry leaders are moving towards fancier biotechnology -- with Glaxo making a better job of it.

Shire is one player that really has benefited from this shift, with the shares rising two-and-a-half-fold since 2009 to today's 1,902p. But even after that rise, they're still only on a forward P/E of 14 for 2013, which is modest for a business with appealing growth characteristics.

A serious test will come when Shire's growth starts to slow -- we need to see a well-managed transition to paying dividends, which currently yield than 1%.

Trinity Mirror

Newspaper publisher Trinity Mirror (LSE: TNI) has had a torrid time in recent years, seeing its share price slide by 95% since 2007, to just 26p today.

But there are some share-price bottoms that can be picked profitably, and this might just be one of them. During the past year, the company has managed to dump deeply unpopular boss Sly Bailey, and it looks like plummeting profits might finally have been arrested.

Forecasts suggest declining earnings for this year and next, but they put the shares on a P/E for the full-year of just 1.2 (I'll write that in words -- one point two -- in case you missed it).

The company is sitting on a chunk of property, too, and the current price-to-book is only 0.1. With a market cap of only £71m, Trinity Mirror remains profitable and has a property portfolio of around £170m (and the annual report suggests that is an undervaluation).

Smith & Nephew

Smith & Nephew (LSE: SN) also reports its interims on Thursday. It's a world leader in orthopaedics -- prosthetic hip and knee joints, and so on -- but it's also involved in wound management and endoscopy.

The 654p shares offer a prospective dividend yield of sub-2% and are on a forward P/E of around the long-term FTSE average of 14, so they might not look like a great bargain now. But I reckon we're looking at a serious long-term opportunity here, with earnings growing steadily year-on-year, and dividends expected to grow by around 10% per year.

What now?

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> Alan Oscroft does not own any shares mentioned in this article. The Motley Fool owns shares in Smith & Nephew.

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