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Weekly Shares Tips

In association with Shares Magazine.

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19 January 2017

To help you maximise investment opportunities, we have teamed up with Shares Magazine to provide you with timely insight into current market trends.

Below you will find their top tips and the week's Best and Worst Performers.

Important information

This webpage contains information supplied by Shares Magazine that is intended for general information only and therefore specific needs, investment objectives, risk appetite or financial situation of any person have not been taken into consideration. It does not constitute advice or an invitation to invest.

Please remember the value of your investments and any income from them can go down as well as up and you may get back less than the amount you originally invested.

Past performance is not a guide to future performance.

AO World

Loss to date: 13.7%

James Crux

We’re disappointed with the share price performance of European online electrical retailer AO World (AO.). We believed shoppers would spend heavily on washing machines, televisions and computers over Christmas ahead of 2017 price hikes and this proved to be the case. AO reported (12 Jan) solid overall UK revenue growth of 8.9% for the third quarter to 31 December 2016.

Unfortunately, the performance fell short of expectations. The EU growth rate slowed and AO also expressed caution on its final quarter, citing the uncertain UK economic outlook with currency-driven price hikes set to crimp consumer demand.

The good news is AO assured the full year performance would fall within the previously guided range. For the year to March 2017, Numis Securities, a buyer with a 250p price target, sticks with its estimates for a top line surge to £711.8m (2016: £599.2m) and narrowed pre-tax losses of £6.9m (2016: £8.4m).

AO World’s leading customer proposition should support long term profitable growth in the UK and overseas, while UK comparatives ease materially in its fourth quarter, which may turn out better than the market fears.

Shares says:
"While we recognise concerns over fierce competition and a punchy valuation, we’re staying positive for now."
Buy AO World


Gain to date: 60%

Tom Sieber

Small scale gas-to-liquids play Velocys (VLS:AIM) is up nearly two thirds since we highlighted its potential in September 2016. We see more to come, particularly as it has struck a very interesting deal.

The announcement of a strategic tie-up with Japanese fabrication group Morimatsu (17 Jan) shows the company is beginning to put its growth strategy into action.

We flagged Velocys when it was close to all-time lows. The share price has since come back to life thanks to management in December 2016 outlining long-term plans for the business.

Historically gas-to-liquid projects have required capital investment running into billions of dollars. They were only really an option if you had very large quantities of gas to develop.

Velocys claims its technology is efficient on a much smaller scale and therefore represent a way of developing otherwise ‘stranded’ deposits of natural gas.

Seeking strategic partners was a key element of the group’s relaunched strategy and the proposed deal with Morimatsu is a first demonstration of that plan.

The next catalyst on the horizon is commissioning of the company’s first full-scale and most advanced project, the ENVIA-1 plant at East Oak in Oklahoma City. News is expected on this front in the next few weeks.

Shares says:
"Keep buying at 48p."
Buy Velocys

FDM goes for the hat-trick

IT consultancy has beaten market expectations again

Steven Frazer

IT services consultancy FDM (FDM) has beaten full year forecasts for the third straight year since the company returned to the stock market in 2014.

While the margin of outperformance through 2016 prompts broker Stockdale to push through only a modest 3% upgrade to pre-tax profit forecasts, it is certainly a feather in the cap for chief executive Rod Flavell and his team.

Stockdale is now expecting pre-tax profit to move from £30.1m in 2015 to £36.6m in 2016, before hitting £41.1m in 2017.

Shore Capital believes FDM is likely to outperform consensus expectations in the foreseeable future.

‘We think the shares are good value at current levels as there is an earnings upgrade cycle that will come over the next couple years and reiterate our “buy” rating,’ says Shore Capital analyst Peter McNally.

This should raise wry smiles among loyal shareholders following the panic sell-off in FDM shares directly following the vote for the UK to leave the EU on 23 June.

That sparked a 28% collapse in the stock from 590p to 425.5p, triggering the stop loss on the running Shares positive call, published on 17 March 2016 at 539.5p. The share price has since recovered all of that lost ground and more, now changing hands at 620.5p.

Shares says:
"FDM has a proven record as a nimble, high-quality execution business with substantial UK and overseas growth potential. We remain fans."

Best and worst performers

Week change to: 18/01/2017

Source: SharePad

FTSE 350 best performers
% change
Ted Baker
JD Sports Fashion
Anglo American
Vedanta Resources
Standard Chartered

FTSE 350 worst performers
% change
IP Group
Nostrum Oil & Gas
AO World
Spire Healthcare
Allied Minds

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Alliance Trust Savings Limited is a subsidiary of Alliance Trust PLC and is registered in Scotland No. SC 98767, registered office, PO Box 164, 8 West Marketgait, Dundee DD1 9YP; is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, firm reference number 116115. Alliance Trust Savings gives no financial or investment advice.