Seven ‘sinful’ stocks to avoid
2 Aug 17
With the FTSE 100 on an almost continual rise, which are the ‘red flag’ stocks that investors should watch out for? Investment bank Liberum lists the seven ‘sinful’ stocks in the top 100 they would “prudently seek to avoid”.
Liberum analysts were concerned over Shire’s ability to plug a hole in earnings left over from patent expiry and competition, according to the Sinners note.
The global biotech firm raised red flags in the report for consistent use of exceptionals in its accounts, a rise in the money it does not expect to collect, capex and governance.
Roger Franklin, healthcare analyst, said: “Whilst Shire may be appearing to underinvest in capex, this will increase meaningfully in 2017 due to continued investment in capacity at Baxalta.
“One reason for our recent downgrade was that faith in this M&A based model has been undermined by recent deals whilst internal research and development remains too weak to fully plug the hole in earnings from patent expiries and competition that opens up as we move into the 2020s.”
Tags: Investment Strategy
