Friday tips round-up: Imperial Tobacco, Yell, McBride

While not an investment for the more ethically-minded, tobacco is a fantastic business to be in. Even a recession cannot dampen smokers' desire to inhale - because they are addicted. There are also new markets globally to move into, all of which means Imperial Tobacco will be generating a steady stream of cash for many years to come.

The shares are trading on a September 2010 earnings multiple of 11.6 times, falling to 10.6 next year, which does not look expensive. The current year prospective yield is 4% rising to 4.6% in 2011 - well worth having. Buy says the Telegraph.

Whisper it, but trading at Yell Group is not getting any worse. That is the inference from yesterday's third-quarter figures from the FTSE 250 directories publisher, which, for the first time in recent years, did not talk down its prospects.

Another draw is Yell's high operational gearing. On Deutsche Bank's calculations, every 1% rise in sales translates into a 4% rise in operating profits and an 8% to 10% in earnings per share. There is no dividend and net debt, even after a £660m rights issue last year, is £3bn. At 43¼p, this is a "buy" for the brave says the Times.

A 1% rise in underlying sales might seem rather feeble from a company that usually grows four times as quickly. But that's not how the stock market saw yesterday's first-half figures from McBride. Shares in Europe's biggest supplier of own-label household goods were nudged up to a new three-year high. At 225p, or 11 times earnings, there is every reason to hold says the Times.

Fuller, Smith & Turner is not a company that will ever spark fireworks but neither is it in the habit of giving investors nasty surprises. It expects to beat full-year forecasts and an upcoming refinancing of its £85 million bank facility presents no threat. The shares, up 2p at 539p, are trading on 16.6 times full-year earnings. A solid long-term bet says the Times.

Fuller's unveiled a second interim dividend of 5.35p and reaffirmed its "progressive" payment policy. There are many reasons to like Fuller's, which has a great product and is a well run business. It's just that the shares are pricey. Avoid for now but be prepared to buy on any weakness says the Independent.

Vodafone shares, on 9.2 times forecast earnings for 2011, are not expensive and the dividend yield is excellent (6%). But, as organic revenues remain in decline in large parts of the business, we feel the recent rise in the share price has taken care of much of the short term upside. So hold says the Independent.

Aviva is now the third life insurer to report a marked improvement in fourth-quarter sales that topped analysts' forecasts. Aviva has a much broader spread of business than Standard Life and arguably has better growth potential. It's also a good deal cheaper than Prudential. Buy Aviva says the Independent.


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