Share tips from 3 City legends

Justin Urquhart-Stewart: Buy or sell Tesco and Lloyds

Ignore the hyperbole. Find out why Justin Urquhart-Stewart reckons both Lloyds and Tesco will do well next year. Also find out where he thinks the FTSE 100 will end 2015.

The year ahead is going to be "fascinating", says industry expert Justin Urquhart-Stewart, and although warning signs are flashing around the globe, he is confident of global growth in 2015.

Prime Minister David Cameron talked recently about warning signs which are flashing around the globe, but Urquhart-Stewart reassures investors that these are not new issues. Of the risks, he points to the UK General Election which is fully expected to throw out a confused result. The market hates uncertainty. He also points to the eurozone, although accepts that action is being taken there, and to the US which continues to be impacted by the end of quantitative easing (QE) and a plunging oil price.

He suggests investors steer clear of government bonds, advising people to look at keeping a mix of short-term bonds and cash. As there is a shortage of liquidity, flash crashes are expected to become more common, providing opportunities to buy stock at a discounted price. Urquhart-Stewart sees the FTSE ending at 7,300 next year.

Stock-wise the analyst likes to look for good value with a bit of support, pointing to Tesco and Lloyds. Although the bank still needs to offload some of its portfolio, it is in recovery and dividends are expected to line investors' pockets in the near future.

Of the dogs, he likes Tesco, wondering how much worse can it get?

"This is fundamentally a very profitable business and is strong enough to do something about it, it’s not written off. We do love the hyperbole in the papers assuming this business is bust, it’s nowhere near bust. I think if management take good action we could see a turnaround here and so here is the opportunity for buying some decent prices of shares at a discount."

David Buik: Top stock tips

City legend David Buik reveals a long list of companies and sectors investors should consider buying. Discover tips for the short term and others to stick in the bottom drawer.

Although Panmure Gordon is stock-selective not sector-selective, commentator David Buik is bullish on pharmaceuticals and banks, though he warns that investors have to be patient with the latter.

Buik likens forecasting the year ahead to asking what is in "Pandora's box", and many sectors are fully-priced. But a healthy pick up in M&A activity should give a boost to the drugs sector.

"From the biotech perspective, a lot of drug companies are having problems in creating new drugs that are acceptable to the authorities and therefore acquisitions and purchases helps with their problems," he explains.

For individual stocks, Buik reckons GlaxoSmithKline is poised for a potential recovery after problems in China and suggests investors keep a watchful eye on AstraZeneca.

Patience is a virtue, and Buik reckons those who are able to keep their cool when it comes to investing in the banks will be rewarded, suggesting Barclays, HSBC and Lloyds. He warns investors to be even more patient with RBS, as he doubts it is a recovery situation in the near future, although he doesn't rule it out.

For those looking to tuck a stock away in the bottom draw, Buik suggests Barclays, GlaxoSmithKline and other banks like TSB.

"But you are going to have to be very patient. The sector is under caution at the moment from the regulators, it keeps coming out with bad news and therefore you can’t expect things to right themselves very quickly.

"But given a decent following wind and the fact that we have shaken off most apples from the tree, things should improve. One problem against it is Europe, its banks are grossly under-capitalised and it needs help, which they will get from the ECB but also from shareholders."

Buik reckons European banks will need an injection of €200 billion in the next two to three years to be able to easily pass the stress tests.

Utility companies are useful, and although there is some noise about the parties trying to control prices, Buik says it is a dangerous thing to do. He thinks some firms in the sector are "solid" and worth looking at.

Buik also names Fusionexm (FXI), Innovation Group, Daily Mail and General Trust and housebuilders Persimmon and Barratt Developments.

"Housebuilders should not be dismissed with the contempt they do not deserve," he concludes.

Malcolm Graham-Wood: Oil share tips for 2015

Industry expert Malcolm Graham-Wood names a dozen oil stocks worth buying, with something for every investor whatever their attitude to risk.

It's hard to escape falling oil prices, especially at this time of year when everyone is predicting how low they can fall and for how long. While some predictions vary, what is pretty certain is that low prices are going to continue to hit producers into next year. Although it isn't going to be easy, industry expert Malcolm Graham Wood is confident that for those who can whether the storm, returns are to be had in the second half of the year.

He suggests investors look for companies that have flexibility with their projects, are well-financed and are producing oil and gas in cheap areas, like onshore.

"There are a number of stocks that are high risk but have a really exciting exploration portfolio and if they bring in one or two exciting wells they might be quite good too," he explained in an exclusive video interview with Interactive Investor.

Shell's chief executive Ben van Beurden has been in the role for a year now and prioritised cutting capex from the word go. Shell benefited from the high oil prices earlier this year, but those who now want to follow suit are too late, as they will not recover anything like Shell's returns.

"With the new CEO and the strengthening/streamlining of the balance sheet, they are in a better position than anyone else," said Graham Wood, drawing comparisons with BP.

"BP has got too much on its plate. They have 20% in Rosneft, which is causing no end of grief, and they are still tied up in the court in the US. Although they are cheap, they are cheap for a reason."

Oil company Rosneft is primarily owned by the Russian government, which hiked its interest rate up to 17% from 10.5% to try and support the rouble earlier this week. While BP's payment of its larger dividend, which grew by 10%, must have pleased income-hungry investors, Graham-Wood has called it "borderline irresponsible" and may mean its dividend will need to be cut in the future. This is in contrast to Shell's consistent 4%-plus dividend yield.

"BP is one to watch out for but it is not high risk in being out of BP at the moment. You also can't ignore Chevron and Exxon but I think Shell has the edge on them."

Three camps for small caps

Small cap stocks split into three camps, he says, the ones producing good-quality oil, the more exciting UK stocks and high-risk exploration plays.

For those who are producing good quality oil and are onshore, lower oil prices are not going to be too much of an issue. Graham-Wood points to Caza Oil and Gas, which still has a good rate of return at $60-$70 a barrel West Texas. Genel and Gulf Keystone are also ones to watch, as Iraq's central government is now letting Kurdistan export crude oil, so it looks like they will be paid. Oil and gas company Sound Oil's onshore production is paying all its costs and it has an exciting exploration project which could come in at the end of 2015.

In the UK camp sits Premier Oil, which Graham-Wood says is looking interesting for the "first time in a long time". Premier is based in the North Sea, Far East where they are selling gas into Singapore. With some contracts running up to 2029 and having hedged all of its oil for 2014 and most for 2015 at around $100 a barrel, "they are in a strong position". In the North Sea, Parkmead is catching Graham-Wood's eye, along with Cairn and BowLeven.

For those with a stronger temperament, the industry expert points to President Energy, saying its Paraguayan operations are exciting. He thinks Pantheon will hold some interesting wells, Hurricane Energy is expected to recover after a tough year and Amerisur is going to start producing oil through a pipeline instead of it being trucked away, which should be advantageous.

"There are ones with a lower risk profile, they are others to watch out for as some of these big wells come on stream. Even in a low oil price environment like the first half of next year, some of these companies will be very interesting. The ones that continue to go through it and come out of the second half of next year because they don't need to raise money are all going to do very well in the end," Graham-Wood adds.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.