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Share Centre stock of the week: WPP

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Graham Spooner, investment research analyst at The Share Centre, picks advertising heavyweight WPP as stock of the week.

As the bellwether of the advertising industry, WPP is widely regarded as a global economic barometer. The company offers a wide range of exposure to both digital media and global markets and there has been steady progress in emerging markets, with around 30% of revenue now coming from these countries.

Recent trading updates have been solid, despite a warning from the group that clients are becoming more cautious. October highlighted a good performance at its North American operations, and at that point, guidance for the full year was reaffirmed. There was also news in November of WPP’s acquisition of a majority stake in Essence Digital, a buyer of digital media.

Interested investors should appreciate that new technology should help open up avenues for growth over the longer term and this is reflected in new media related business being WPP’s fastest growing area. This year will also see the US elections, Olympics and European football, which could give the business a boost.

The growing importance of emerging markets and digital media to the company looks set to continue, allied to improving dividends, earnings momentum and a steady flow of acquisitions. Subsequently, we recommend WPP as a ‘buy’ for medium risk investors seeking a balanced portfolio.


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