Insider: Chiefs back recovery here with six-figure buy

Good value at Tesco

Full-year results earlier this month may have beaten consensus estimates, but Tesco has few friends at the moment amid doubts about its ambitious £3.7 billion acquisition of wholesaler Booker.

On the bright side, Tesco recently announced it grew like-for-like sales in the UK last year for the first time since 2009/10 – up 0.9% - and improved group operating margin by 50 basis points to 2.3%, keeping the grocer on track to do 3.5-4% within the next three years.

That meant underlying profit rose 30% to almost £1.3 billion. However, add back a raft of exceptional costs, including restructuring and £235 million fine for dodgy accounting, and statutory pre-tax profit fell by 39% to £145 million.

There are worries about the pension deficit, too, which has ballooned as record low interest rates have shrivelled bond yields. And progress on reducing the gap, despite higher discount rates, is disappointing, down from £5.9 billion in August to £5.5 billion at the end of February. Analysts at UBS had wanted £4.5 billion.

Retail cash conversion of 74% of EBITDA, or cash profit, was also short compared with both expectations and the previous year's 104%.

Tesco still continues to on recovery multiples – 21 times enterprise value/operating profit and a price/earnings (PE) ratio of 17 – but that does drop to 12 and less than 10 in a couple of years. UBS also believes that every £100 million of incremental cost-savings found for the Booker deal is worth 10p a share to Tesco.

According to UBS analyst Daniel Ekstein, Tesco shares are worth 235p, about 27% more than the current market price.

Non-executive directors Steve Golsby and Mikael Olsson have clearly been chatting and decided Tesco shares, down 14% since mid-January and still near a seven-month low, are cheap.

Golsby, still on the board of Mead Johnson Nutrition, part of the baby food firm being taken over by LSE:RB.:Reckitt Benckiser for $16.6 billion, teamed up with his wife to spend almost £75,000 on shares in Tesco at 176.4p.

On the same day, former IKEA boss Olsson coughed up over £26,500 for 15,000 shares at 176.5p.

Time to buy recruiters?

SThree has recovered from a post-first-quarter results blip mid-March to resume its sideways drift that's so far lasted the best part of four months.

But chief operating officer Justin Hughes thinks the £420 million recruiter, which specialises in finding jobs for skilled scientists and engineers, is overlooked and undervalued.

Hughes, SThree through and through having started as a trainee consultant before joining the main board in 2012, has clearly done very well for himself. He's just picked up 50,000 SThree shares at 326.6p, costing around £163,000.

Smaller rival Gattaca – formerly Matchtech and currently valued at around £95 million – is in demand, too, just weeks after a share price shock.

Just a week before half-year results scheduled for the 20th, bosses at the engineering and technology recruiter rushed out a profits warning, admitting that it would make about 10-15% less than expected in the year to July.

However, the slump in share price to a four-year low has proved brief and, with no further nasties on results day, they've now reclaimed all ground lost in the past fortnight.

Confidence has been helped, no doubt, by chief executive Brian Wilkinson who's just spent £75,000 on 25,666 shares at 290.75p. He now owns 176,516 in total worth over half-a-million pounds.

It's reassuring to see bosses have skin in the game at these two businesses, but the EU referendum has hit profits as clients postpone hiring decisions, or park projects.

Let's hope "signs of a return of confidence in recent weeks" observed by Gattaca, develop into a lasting trend.

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.