Gamble of the week: A troubled outsourcer

The shares in this public services outsourcer have been hammered by a run-in with the government, says Phil Oakley. A buy for adventurous investors.

Serco (LSE: SRP) has built a successful business by providing public services across the world, profiting from the huge trend in outsourcing over the last 20 years. By promising to run things like roads, railways, prisons and office blocks better and cheaper than companies and governments can themselves, it claims everyone can win.

Sounds great in theory. But it doesn't always work in practice. Serco is in big trouble with the UK government. In July it was accused of overcharging for an electronic tagging contract, which led to a full-scale review of all its government contracts. Things got worse last week when it was revealed that Serco faces a police investigation for alleged fraud on a £285m prison escorting contract.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Phil spent 13 years as an investment analyst for both stockbroking and fund management companies.

 

After graduating with a MSc in International Banking, Economics & Finance from Liverpool Business School in 1996, Phil went to work for BWD Rensburg, a Liverpool based investment manager. In 2001, he joined ABN AMRO as a transport analyst. After a brief spell as a food retail analyst, he spent five years with ABN's very successful UK Smaller Companies team where he covered engineering, transport and support services stocks.

 

In 2007, Phil joined Halbis Capital Management as a European equities analyst. He began writing for MoneyWeek in 2010.