Three stocks to buy now that will come back stronger after Covid-19
Professional investor Ed Wielechowski of Odyssean Capital, chooses three compelling stocks that should thrive in a post-pandemic world.
It is 12 months since equity markets hit their Covid-19 lows. Few at the time would have predicted the scale of the subsequent market rally, or the speed with which the market’s focus has shifted from concern over companies surviving the pandemic to optimism about those positioned to benefit as economies emerge from lockdown.
We believe that this shift in sentiment has led many more cyclical, industrial, and consumer stocks to trade at generous multiples of fully recovered profits as a rebound becomes priced in. However, there remain compelling but less obvious opportunities that should benefit from a “normalisation” post-lockdown. We have been looking for companies where, on top of a near-term recovery, we may see the virus benefit their end markets and where management can improve their businesses. Here are three examples.
The changing healthcare market
Spire Healthcare (LSE: SPI) is a leading private-hospital operator in the UK. Private hospitals have had their capacity reserved during the pandemic, at cost, to support the NHS. Now activities are returning to normal and the healthcare landscape has fundamentally changed. Backlogs of both private and NHS procedures will take years to clear, with private-sector support needed to achieve this. Spire is well placed to benefit.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
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
The pandemic has also shifted patients’ willingness to engage with healthcare services digitally. Spire rolled out online tools in the crisis to enable digital pre-assessment. Customers enjoy improved convenience while Spire benefits from efficiency gains. We believe further such self-help opportunities exist. Spire shares have had a good run, but continue to trade below a freehold property-backed book value. At around nine times earnings before interest, taxes, depreciation and amortisation (Ebitda) they still offer great medium-term value.
Digitising data services
Wilmington (LSE: WIL) is a provider of data, training, and events to a variety of markets. Despite benefiting from significant recurring revenues, the portion of the business reliant on in-person events and training has inevitably been hit by Covid-19. Wilmington should now see these services bounce back, but more excitingly it has used the pandemic to accelerate its shift to enhanced digital delivery of its services.
Digitising its content allowed Wilmington to keep offering services to its customers through the pandemic, gaining share from competitors. This digital-ready content can now more easily be packaged into new products, served to new customers and accelerate growth. The shares are still 20% below their pre-pandemic level, despite the firm’s improved prospects.
A hidden recovery
Clinigen (LSE: CLIN) provides hard-to-access medicines to healthcare professionals and clinical trials globally. Demand for its services dipped as hospital treatment and clinical trials slowed in lockdown. This demand is set to recover. Clinigen can also benefit from an increased focus on drug distribution as vaccines roll out; new product launches; and cost synergies from recent acquisitions.
Despite the recovery potential, the shares trade on a forward price/earnings (p/e) ratio of ten. While gearing is high, the company has strong underlying cashflow. As leverage falls the shares are likely to trade nearer the long-term average p/e of 15.
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
Ed joined Odyssean in December 2017 as a fund manager. Prior to joining Odyssean, Ed was a principal in the technology team at HgCapital. He joined HgCapital in 2006 and worked on numerous completed deals, including multiple bolt-on transactions made by portfolio companies. He has additional quoted market experience having led all aspects of the successful IPO of Manx Telecom plc in 2014 as well as having evaluated and executed public to private transactions.
Ed started his career as an analyst in the UK mergers and acquisitions department of JPMorganCazenove in 2004.
-
RICS: Housing market continues to strengthen but 2025 could be challenging
The latest survey by the Royal Institution of Chartered Surveyors reports a resilient UK housing market, but warns of headwinds next year
By Ruth Emery Published
-
Bitcoin price one of the most-asked questions on Alexa - here's how to buy the cryptocurrency
According to figures from Amazon, which cover September 2023 to November 2024, pop star Taylor Swift and Bitcoin were named among the most popular Alexa queries of 2024
By Chris Newlands Published
-
Share buybacks rise in the UK – what effect will it have?
Share buybacks are gaining popularity in the UK – good news for investors
By Rupert Hargreaves Published
-
Should you bet on US stocks?
You don’t have to be bearish on US stocks to worry that they are now such a large share of global indices
By Cris Sholto Heaton Published
-
Is now the time to buy Marshalls?
Former market darling Marshalls, a landscaping and building products supplier, looks too cheap. Is it time to buy this once-admired stock?
By Jamie Ward Published
-
Top UK stocks with healthy cash flows and dividend yields
Three promising UK stocks according to Alan Dobbie, co-manager, Rathbone Income Fund
By Alan Dobbie Published
-
Warren Buffet invests in Domino’s – should you buy?
What makes Domino's a compelling investment for Warren Buffet's Berkshire Hathaway, and should you buy the UK-listed takeaway pizza chain?
By Dr Matthew Partridge Published
-
Invest in Grainger: a landlord with growth potential
Grainger is putting years of uncertainty behind it and investing for expansion
By Rupert Hargreaves Published
-
UK equities are set for a bull market – buy now
Investors shouldn’t wait for a crisis to buy UK equities, says Max King. Do so now, in the expectation of much better returns in due course
By Max King Published
-
How to find top-quality income picks in the UK stock market
Four top-quality UK stock market picks according to Iain Pyle, manager of Shires Income Trust
By Iain Pyle Published