Three to buy
Tripadvisor
Barron’s
Online travel-reviews website Tripadvisor “has struggled to make the most of its hundreds of millions of users”, but a new travel-subscription service for $99 a year offering discounted hotels and other benefits “could rekindle interest”. The “fragmented market” of online bookings “is crying out for a strong aggregator”; enter Tripadvisor Plus. If it attracts ten million subscribers, that would generate $1bn in revenue and $500m of free cash flow – and propel the stock above $100. $36.26
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Medica Group
The Sunday Times
The backlog of patients waiting for elective procedures is “likely to boost demand for Medica Group’s services”. The firm offers teleradiology to hospitals that outsource around 20% of their cases. It expanded last November with the €16m acquisition of Global Diagnostics Ireland, and it has also formed a partnership with Australia’s Integral Diagnostics. Sales for this year are expected to jump to £61.4m, up from £36.8m last year. “There is a good chance Medica will be in demand in the months ahead,” especially over the summer as NHS radiologists take a holiday. 175p
Gateley
Investors’ Chronicle
Revenue is bouncing back at law firm Gateley, thanks chiefly to its property and corporate divisions. They have been buoyed by the stamp-duty holiday and rumours of a capital-gains tax hike, which has encouraged mergers and acquisitions. Profit before tax was up by 7.1% to £19.3m in the year to 30 April. The government is set to keep promoting housebuilding and banking work will increase this year too. 210p
Three to sell
Sumo Digital
The Mail on Sunday
Video-game developer Sumo Digital counts giants such as Microsoft and Apple as customers. It builds, tests, and designs games and recently began publishing its own titles, a “higher-risk but higher-reward” undertaking. Chinese internet giant Tencent “clearly believes” in Sumo; it has offered to buy it for £900m. A higher offer appears unlikely to materialise. Shareholders have benefited from Sumo’s growth, but cautious investors should sell now in case the deal turns sour. 495p
Rio Tinto
The Daily Telegraph
Rio Tinto’s strong performance in 2020 was overshadowed by the firm’s destruction of two ancient rock shelters in Australia. The firm has apologised and scrapped plans to mine at “culturally sensitive” sites. But despite pre-tax profits of $15.4bn last year thanks to the rising price of iron ore, it remains risky. The share price ultimately depends on “how many roads, airports and bridges” countries, particularly China, whose demand is driving up iron-ore prices, choose to build. Tying investments to politicians’ decisions in another country “is a gamble pure and simple”. Avoid. 5, 926p
Focusrite
Shares Magazine
Focusrite “continues to mark record share-price highs”. The music and audio-products firm has raised revenue and profit expectations for the year to the end of August. Musicians have been forced to record at home during the pandemic, while podcasting is “booming”. But the global shortage of semi-conductors is making it difficult to meet rising levels of demand. This year’s earnings look set to decline as restrictions are eased. Take profits. 1,416p
...and the rest
The Mail on Sunday
Frontier Developments is a leader in the multibillion pound video-gaming industry. It has millions of loyal fans behind it. A recent trading statement “caused consternation” due to “teething problems” with one of its new games. This share-price dip is a buying opportunity (2,500p).
Barron’s
Wyndham Hotels & Resorts’ “tilt toward no-frills... brands” is working. Those “tiers of lodging” have recovered faster than more upscale ones. Meanwhile, Hilton Worldwide Holdings’ fortunes are tied to group and business travel, but the firm’s “asset-light” operating model – it relies on franchising and management fees instead of owning hotels – “provides some flexibility” and protection. At $69.80 and $125.26 respectively, both stocks are buys.
The Daily Telegraph
Doric Nimrod Air Three owns four Airbus A380s and leases them to Emirates, the airline. They have remained grounded throughout the pandemic, but dividends have continued to flow as Emirates is contractually obliged to make lease repayments. Hold (41p).
Investors’ Chronicle
Recruiter SThree is benefiting from the rising number of job vacancies as firms seek to hire employees for permanent positions. Finances “are sound” and net cash sits at £47.5m, “marginally below” the level recorded at the end of the financial year in November. The shares aren’t too expensive, “but we remain on the sidelines”. Hold (462p). Vimto producer Nichols is a “well-run business” – witness its ability to maintain a net cash position throughout a “uniquely challenging period”. But rising supply-chain costs could prove a problem. Hold for now (1,450p).
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