Three to buy
National Grid
National Grid (NG) is an “oft-overlooked opportunity to benefit from the energy transition” and it is now “pivoting to electricity assets”. It recently acquired Western Power Distribution, the UK’s largest electricity distribution network operator, and plans to sell a majority stake in its gas grid. Electricity usage is predicted to rise significantly and NG’s “monopoly position” means it could be a simple, low-risk way of capitalising on that growth. The company expects underlying earnings per share to grow 5%-7% between 2021 and 2026. It aims for its dividend at least to keep pace with inflation. 1,077p
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Porvair
Investors’ Chronicle
Shares of filtration and environmental technology specialist Porvair “reversed their downward trajectory” after it reported a return to pre-pandemic profitability. Growth in its laboratory segment, which makes equipment for coronavirus testing, helped increase its revenues by 8% year on year. Sales of coolant and fuel filters for commercial aircraft fell by 10% as travel remained slow, but should
pick up in 2022. The company has an “excellent... record of growth” and tends to give “conservative financial guidelines”, so could perform better than expected. 680p
ProCook
The Sunday Times
Cookware retailer ProCook removed its goods from Amazon last year as it “reckoned shoppers could be tempted onto its website” and into its shops. It benefited from an increase in home cooking during the pandemic – sales went up 37% in the year to April 2021. The return to offices and restaurants, rising energy bills and an increase in food prices will now be a key test. However, revenues for the three months to 9 January were up 34.6% from the same period the year before. 159p
Three to sell
Carnival
The Daily Telegraph
Cruise-ship operator Carnival’s “second consecutive plunge in revenues and a multibillion-dollar loss are hardly a surprise”. It “may seem perverse” to suggest selling as travel restrictions ease. But the company’s weaker balance sheet could limit its ability to cash in on the resurgence of travel. Heavy losses have eaten into shareholders’ funds. Full-year results for 2021 show $9.4bn cash at hand, but debt of more than $30bn. These figures don’t provide much comfort “should anything else unexpectedly go wrong”. Maybe holidaymakers will “flock back to cruise ships when Covid-19 fades into the memory and becomes endemic”. But consumers might also feel disinclined to “share a big boat with thousands of other passengers”. 1,504p
Deliveroo
Motley Fool
Online food-delivery company Deliveroo has underperformed the stockmarket so far this year, although it has shown impressive growth. Gross transaction value was up 36% year on year for the three months to 20 January.
“The numbers suggest Deliveroo still has plenty of momentum post-pandemic.” But that doesn’t make it a good buy. Analysts expect the firm to post net losses of £226m and £196m for 2021 and 2022. Tougher regulations in Europe could make gig-economy companies such as Deliveroo reclassify some of their workers as employees, which may raise costs significantly. Rivals such as Uber and Just Eat also
pose a threat. Avoid the stock for now. 149p
...and the rest
Investors’ Chronicle
Software company NCC helps clients get their software up and running should their provider fail. It also has a cybersecurity consultancy service. Last June it acquired US software business IPM for $220m, which will allow it to expand across the Atlantic. Buy (189p). Gambling group Rank runs the Grosvenor casinos and Mecca bingo clubs. These were badly hit by the pandemic, but are enjoying a resurgence. The company “isn’t out of the woods yet”, but could be a recovery play. Hold (162p).
Mail on Sunday
Mears does maintenance work for local authorities and housing associations. Sales and profits for its 2021 financial year will be ahead of market expectations and it has a strong pipeline of work for 2022. Its contracts last for years and are mostly inflation-linked. Buy (215p).
Shares
Revolution Beauty’s shares have dropped more than 25% since September due to Omicron, cost increases and supply-chain disruption. But the make-up, skincare and haircare firm has global growth potential. It has expanded retail distribution and its online arm since floating in July. Buy (118.5p). Online marketing company Dotdigital has had a “violent” ride, hurt by signs of pressure on margins. But a recent update suggests issues are fading. It could be a takeover target at this depressed price. Buy (140p).
The Daily Telegraph
Growth-focused investment trust Scottish Mortgage has been “an obvious casualty” of the shift away from growth stocks and its shares are down by 26% since November. But its long-term record is unmatched. The team has an “exceptional ability to identify disruptive innovators”. Buy (1,173p).
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