Three to buy
CMC Markets
Entain
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(The Daily Telegraph) “Investors are waking up to the fact that Britain’s gaming companies have a lot to offer their American rivals.” British firms have had a “head start” in developing technology necessary for online betting because until recently betting on sports and games was banned in the most of the US. Entain rejected a bid from an American firm earlier this year, but the company has proved it can expand on its own. Entain is undervalued and its new CEO looks “up to the task” of expanding the group. 1,529p
Croda
(Shares) Chemicals firm Croda is a “highly exciting stock”. Its “new-found expertise” in lipid nanoparticles, or LNPs, the fatty molecules used with drugs and vaccines to ensure the chemicals don’t get destroyed by the body and can enter cells, bodes well for the future. Only a few companies in the world make LNPs, which are crucial in mRNA treatments such as the Pfizer and Moderna Covid-19 vaccines. The growth potential “means investors should not get hung up on an apparently expensive valuation”. There are several mRNA vaccines in development. 6,354p
Three to sell
CVS
(The Daily Telegraph) Veterinary group CVS’s shares have “galloped to a fresh record high”. But the stock now trades on over 50 times this year’s earnings forecasts. The balance sheet is healthy and the pet-care market remains strong, “but the rating now looks very full. Time to move on.” 1,806p
Cineworld
(Investors’ Chronicle) Cineworld reported its first-ever annual operating loss in 2020 – $2.26bn – as sales slumped by 80% to $852m. It comes as no surprise given lockdowns across the world shut cinemas and movie releases were postponed. Though Cineworld is banking on pent-up demand to shore up its balance sheet in 2021, it acknowledges that cinemas are unlikely to reach pre-pandemic capacity before 2025. The firm also struggled before the virus. In an effort to “justify the price discrepancy” between a cinema visit and a Netflix subscription (the former costs as much if not more than the latter) by refurbishing its sites, it “loaded the company with debt”. Post-virus demand alone “will not be enough to rescue Cineworld”. 106p
The Geo Group
(The Motley Fool) The Geo Group is a real estate investment trust specialising in prisons, rehabilitation facilities, and immigration-detention centres across the US. The Biden administration has decided not to renew these operators’ government-service contracts, which will cost Geo 25% of its overall revenue. The company’s sales and net income for 2020 dropped to $2.35bn and $113m from $2.48bn and $166.6m in 2019. The group is now is generating less cash than it can pay out in dividends. Around $3bn of debt is another reason to avoid the stock. $7.05
...and the rest
The Daily Telegraph
Full year results at soft-drinks group AG Barr “fell pretty flat”. Sales were down by 11% owing to lockdowns as increased consumption of Irn-Bru, Rubicon and Funkin at home was not enough to offset the loss of business from pubs and restaurants. But the firm has a solid balance sheet and hopes to return to the dividend list in the coming year. Hold (495p). Vaccine maker AstraZeneca is worth buying on weakness. Its “intelligent approach to researching new treatments”, its presence in China and “highly capable boss” all bode well (7,289p).
Investors’ Chronicle
Biotech manufacturer Bioventix’s revenues for the six months to December were broadly flat, and revenue estimates for the new year “remain under review” given the disruption to the diagnostics industry amid the pandemic; resources were directed towards those affected by the virus. The murky outlook makes the stock a hold (4,175p).
Shares
Specialist lender Arbuthnot Banking focused on growing its deposits in 2020 to avoid “contagion from the slowdown” and the potential for a liquidity squeeze. Customers’ balances increased by 13% to £2.36bn, and the bank has been “de-risking” by cutting exposure to residential property. Buy (862p).
Motley Fool
Cruise operator Carnival must wait several more months before “revenue-generating customers” board its ships. Analysts expect a 96% plunge in annual sales in the quarter to 1 March (1,707p). Electric-vehicle charging-kiosk operator Blink Charging makes $6.2m in sales but is worth $1.7bn. That makes no sense ($42.15). Avoid both.
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