Thursday tips round-up: LSE, Burberry, Northern Foods

The London Stock Exchange has had a rocky ride recently, so much so that after moving back into the FTSE 100 index of blue chips stocks, it was booted off again in the June index review.

Recent price changes have made the LSE more competitive, and compared to April, the exchange's share of trading of UK cash equities was up in June. Crucially, LSE also made gains on the competitive FTSE 100 market, with its share rising from 54.8 per cent in April to 57.4 per cent in last month. Given the undemanding valuation, the Independent is willing to stake its bets on further success. Buy.

As Burberry is currently trading at around 19 times 2011 earnings, with a fairly modest yield of 1.7pc, the Telegraph is shying away from bagging more of Burberry for now. But the group's strong sales growth and argument that it is resilient to austerity measures - some people will always have room in their wardrobe for a new handbag, it seems - mean that if you have already bought in, Burberry is worth hanging on to.

Northern Foods expects trading to remain challenging, which might be stating the obvious, but Northern says it is prepared for further squeezes on consumer spending, having already expanded the range of lower-value products it provides to Tesco, in particular. The shares sell on about seven times' this year's profits, which looks cheap given the yield. But uncertainties over that dividend will continue, says the Times.

The World Cup was not a big event for the pub group JD Wetherspoon, which eschews Premier League football matches in order to provide a quiet drinking environment. Perhaps a more interesting note for potential investors is that analysts at Investec and Panmure Gordon have a "buy" recommendations on Wetherspoon, with a share price target of around 590p. This is largely based on its aggressive roll out of 250 new pubs to the end of 2014 and the reasonable value of its shares, which trade on a 2011 price-earnings ratio of just over 12. Buy, says the Independent.

Cranswick is relying on the trend towards pork as a cheap and healthy form of protein and towards its premium sausages, again seen as good value for stretched family budgets. A Jamie Oliver range is just appearing in the shops. Companies such as Cranswick are inevitably reliant on what used to be called the pork cycle. Farmers build herds, the price drops, herds are scaled back and so on. Cranswick believes that it can manage such fluctuations by further volume growth and greater efficiencies. The shares sell on about 12 times' this year's earnings. Not cheap, but worth picking up on weakness, according to the Times.

On a valuation basis, Mitie is compelling. Trading on a 2010 price-earnings ratio of 10.3, and offering a dividend yield of close to 4 per cent, it would very difficult to sell the shares, even with the cuts serving as something close to a herd of elephants in the room. Hold on to the stock, watch the divi roll in, says the Independent.


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