Three to buy
Boku
(The Mail on Sunday) This technology business helps consumers to pay for music, video games and films via their mobile-phone number. Boku’s one-tap bill service is used by 18 million people in the UK, Germany, Japan, South Korea and emerging economies in Southeast Asia. The global coronavirus lockdown is likely to see even more people spending time online, which will give e-commerce a boost. For those brave enough to invest during the current turmoil, “these shares look like a bargain”. 59p
Barratt Developments
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(The Sunday Times) This housebuilder almost went bust during the last crisis, but is much better placed to withstand the coronavirus storm. Construction shares have been particularly hard hit by the pandemic sell-off, with Barratt losing more than half of its market value in a month. The fall looks overdone. Barratt had £433.8m net cash at the end of December, thanks in part to the Help to Buy scheme. While a short-term sales hit is inevitable, Barratt should prove “as safe as houses” provided the disruption “is measured in months and not years”. Buy. 408p
Tesco
(Shares) “Whatever else is going wrong... we all still have to eat.” Consumer discretionary stocks have been hammered by virus-induced restrictions, yet stockpiling has led to surging sales at supermarkets. Tesco is the market leader and has extensive supply chains, so it can handle the sudden demand surge. The underlying business is also in better shape, with sales rising, margins on the up and greater capital discipline from management. 215p
Three to sell
Marks & Spencer
(Investors Chronicle) Marks & Spencer has axed its dividend and slashed planned capital expenditure in response to the coronavirus pandemic. The group’s clothing and home business will suffer from lacklustre demand and will soon have a surplus of unsold seasonal stock to contend with. To make matters worse, the food operation has not enjoyed the same stockpiling surge as supermarket peers owing to its bias towards chilled and fresh produce. A food delivery partnership with Ocado set to launch this autumn is one cause for optimism in the medium-term, but the shares should nonetheless be avoided for now. 115p
Dignity
(The Daily Telegraph) The fact that this funeral firm has managed to “issue a profit warning and axe its dividend” in this month of all months is testament to how much pressure the business is under. Dignity has warned that regulators may bring in price controls as they probe why funeral costs have risen at above-inflation rates for more than a decade. Net debt stands at £506m and growing competitive pressure means profits are already sliding. It’s time to swallow a horrid loss and move on. Sell. 317p
GVC Holdings
(The Times) Sporting events around the world are being cancelled and it’s not just the fans who are feeling the gloom. Sports betting companies are in for a sales slump as punters now have “almost nothing to bet on”. Shop closures in Europe and in the UK are a threat too. More positively, a solid balance sheet means there is no danger of GVC breaching its debt covenants. Still, even on a yield of 12.4% the shares are not worth a flutter. Avoid. 312p
...and the rest
The Mail on Sunday
Video-games group Team17 is one of the few shares to have risen this year and is now well placed to benefit from a “stay-at-home boost”. Investors should resist the temptation to bank profits and “keep the faith” for more upside to come (470p).
Investors Chronicle
Shares in housebuilder Vistry Group, previously known as Bovis Homes, are down by more than half in a month. With a turnaround under way they represent good value on a 2021 forecast price/earnings ratio of just five (788p). Avon Rubber’s position in niche military and dairy markets gives it pricing power and rising global defence spending is another tailwind. Buy (1,970p).
Shares
The recent sell-off provides a rare opportunity to buy cheaply into the structural growth of drug companies through the International Biotechnology Trust, which trades on a bargain 18.5% discount to net asset value (NAV) (457p). The shift towards remote working may create new opportunities for software and IT services business Softcat. Keep buying (998p).
The Times
The supermarkets remain under intense competitive pressure but good cash flow at Wm Morrison and a strong balance sheet at Tesco make the pair the best picks in the sector – hold (199p; 229p). Volatile markets may mean more business for financial betting firm IG Group but the regulators are never far away: hold (625p). Nurofen and Dettol maker Reckitt Benckiser is likely to see higher sales from Covid-19, but the long-term picture is problematic as own-brand competitors gain market share. Hold (5,300p). Worrying debt and a frail luxury-car market mean that investors should “drive by” Aston Martin (144p).
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