Two to buy
CVS
(Investors Chronicle) Britain’s largest veterinary-services company operates more than 500 practices. Levels of pet ownership have risen steadily over the last ten years and “rocketed” under lockdown. The number of insured pets has risen too, which will “help to protect CVS’s income in an economic downturn”. The reopening of its small-animal sites has boosted sales. The forward price/earnings ratio of 23 does not fully reflect the company’s potential. 1,205p
DFS Furniture
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(The Times) People forced by the pandemic to stay at home are “using their spare cash to make their homes and gardens... a bit smarter or... a bit more bearable”. That has bolstered the home-improvement sector. Sofa retailer DFS is a “post-lockdown winner”, with orders worth £70m in the six weeks since it reopened its stores. It is expected to make adjusted profits of £80m next year on sales of £1bn. 170p
Two to sell
Just Eat Takeaway
(The Times) “The world’s largest food delivery company outside China” did well out of Covid-19. Sales jumped by 44% in the first half, but pre-tax losses widened. They may widen further now that the firm is building its own distribution network to keep pace with Deliveroo and other rivals – an expensive undertaking, especially in the US. Just Eat should survive the industry’s “shakeout”, but the shares are overvalued given the “unappetising” outlook. Avoid. 8,706p
Micro Focus
(Investors Chronicle) Once Britain’s biggest technology group, this collector of software assets came unstuck in 2017 when it bought Hewlett Packard Enterprise’s software business. The move cost Micro Focus $8.8bn, doubling the debt load to three times its market capitalisation and triggering a goodwill impairment charge of $960m over three years. Competition is “fierce” and a recovery looks unlikely. Sell. 296p
...and the rest
Investors Chronicle
AB Dynamics, “a ‘one-stop testing shop’ for the global automotive industry”, is priced at a premium. But a strong predicted recovery and regulatory tailwinds make it worth buying (1,735p). Investment platform provider Nucleus Financial is a “decently priced growth stock” (130p).
The Daily Telegraph
Online gaming operator Gamesys has delivered on expectations and “there could be further gains to come”. Hold (£11.20). Matthew Dobbs, the manager of the Schroder AsiaPacific Fund, will be missed when he retires. “We will hold, but monitor progress” (491p).
Shares
Despite navigating the pandemic “impressively”, UP Global Sourcing, the consumer-brands firm behind Salter weighing scales, remains a bargain (94p). Hold on to shares in LED lighting company Luceco, even though they have “gone bananas” (187p).
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