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Should I Buy These 5 Shares? Whitbread, Aggreko, and Gulf Keystone Petroleum

Thursday - 5/9/2013, 6:19pm  ET

LONDON -- I've been popping stocks into my shopping basket in recent weeks and it's time I took one or two to the checkout. Here are five stocks I've found tempting. Should I buy any of them?

G4S 
G4S won the wooden spoon at last year's Olympic Games, due to its security recruitment disaster. But the Olympics is history now, so is G4S back on track? First-quarter results suggest it still has a long way to go, with group operating margins down 0.6% year over year. Performance has been hit by worries in Europe. Prices are also under pressure in the U.K. and Ireland, but U.S. corporate spending has picked up. Happily, G4S generates 70% of its profits outside the U.K., where U.S. corporate spending helped revenues grow 7.5%. G4S may be a national joke, but it's a global company, generating 70% of its profits outside the U.K. That's good news, with healthy 12% growth in emerging markets helping to offset the modest 4% rise in developed countries. The share price has grown just 3% in the past three years, compared to 30% for the FTSE 100 as a whole, leaving G4S on a relatively lowly 12.3 times earnings. That could make it a good value play, but it still has a lot to prove to this investor.

Whitbread 
The U.K.'s largest hotel and restaurant company seems determined to conquer the world with Costa Coffee, which now boasts 240 outlets in China, and more to follow. Whitbread has done well to defy the downturn, which should have hit demand for meals out and fancy frappes. Its share price is up 95% over the past three years and nearly 40% over 12 months, against 29% and 20% for the index as a whole. And deservedly so, with recent full-year trading results showing a 3.7% rise in like-for-like sales, a 14.2% rise in total group revenue to more than 2 billion pounds, and an 11.4% increase in underlying profit before tax to 357 million pounds. Investors were rewarded by a 12% hike in the full-year dividend to 57.40 pence. I'm glad to see a progressive dividend policy, given that it currently yields just 2.2%, thin gruel for investors. It is also a little pricey 18.8 times earnings. That's the price of success, but given its solid performance -- and prospects in China -- it could be a price worth paying.

Aggreko 
The power systems specialist was blowing hot when I reviewed it in March, but it also faced three cold winds, with the Olympics over, U.S. troops pulling out of Afghanistan, and post-earthquake demand for emergency generators in Japan subsiding. It is down 22% over the past five months, against a 20% rise for the index. It still looks expensive, at 16.8 times earnings, but that's cheaper than two months ago, when it was nearing 20 times. This isn't for income seekers; the yield is a low-voltage 1.4%. Debt levels have risen, as it invests heavily acquisitions, but Aggreko is growing fast, doubling the number of employees and entering 16 new countries over the last five years. It has got cheaper in recent months, but it would be nice if it was a bit cheaper, and that yield was a little more generous.

Gulf Keystone Petroleum
It isn't often I review a company that has grown 350% over the past five years, but that's exactly what Gulf Keystone has done. Unfortunately, it is down 18% over the past two years, including a 30% drop over the last month. That's oil explorers for you. Especially those targeting politically risky regions, such as Kurdistan. The share price has dipped lately, as a legal battle with former advisor Excalibur Ventures dragged on, and chief executive Todd Kozel offloaded a whopping 98% of his own shares to a third party to fund a financing agreement. Is he worried about the result of that legal dispute? This only ramps up the risk to investors, who have had to be patient, as its prime Shaikan asset takes longer to monetize than many hoped. We will have to wait until early next month to discover whether Excalibur is entitled to 30% of Gulf's Kurdistan assets, which could spark a major share price movement either way. That makes this stock too risky for me. Do you feel lucky?

BT Group 
Nice to have, but not quite a Premier acquisition. That was my verdict when I looked at BT Group  in March. Its share price has continued to make progress, up nearly 6% since then. It is also striking new deals, British Land has just signed BT to give customers access to free Wi-Fi at its shopping centres. The two will also be working out how to deliver Wi-Fi at its open-air shopping parks. Citigroup has just raised its target price from 2.50 pounds to 3 pounds. Today you can buy it at 2.79 pounds, a modest 11.9 times earnings. For that you get a 2.9% yield, covered 2.9 times. Forecast EPS growth is a lowly 1% to March 2014, improving to 7% March 2015. BT Group has challenges. It needs to build its broadband customer base quickly, before customer inertia sets in. It is also taking a risk by committing 1 billion pounds into face-off with Sky Sports. But it has surprised me with its performance since privatization, and could well surprise us all again.

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