Three to buy
Cambridge Cognition
We’re living longer, but “our brains can’t always keep up”. Cambridge Cognition makes specialist software for tasks assessing brain health during clinical trials. The company is a “tiddler” with a market cap of just £35m, but revenues rose 50% to £10.1m last year when it signed up more clinical-trial contracts than at any time in its history. It also turned a “very modest” profit and now has a “decent cushion of £3.8m net cash” thanks to an increase in customers pre-paying for its software. Buy. 142.8p
HomeServe
Shares
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Household repairs service HomeServe has sold off due to concerns about its growth prospects in the UK, but the “star performer” is its US business. Management says earnings from this are running ahead of schedule. Meanwhile, the UK arm could benefit from the “current squeeze on consumers’ finances”, which is “likely to encourage more people to take out insurance policies in order to avoid large repair bills”. The firm has a proven operating model, a solid balance sheet and a strong acquisition pipeline, all of which should help it grow. 675p
National Express
Investors’ Chronicle
Public transport will play a key part in the government’s goal to reach net-zero emissions. The UK Climate Change Committee expects between 9% and 12% of car journeys to switch to journeys made by bus by 2030. That bodes well for coach firm National Express. The company suffered during the pandemic, but made it through “without crippling the balance sheet”.
In the two years to December 2021 net debt fell from £1.22bn to £1.02bn. Buy. 224p
Three to sell
Deliveroo
The Times
Shares in food-delivery app Deliveroo are trading at just a third of their 390p listing price. The company has set itself the target of breaking even at some point between the second half of 2023 and the first half of 2024 before turning a profit, but it’s struggling with a post-pandemic comedown and the increasing competitiveness of the food-delivery market. It has £1.3bn on its balance sheet, over half of its market capitalisation, but this balance “is only heading one way” as it seeks to invest in improving its platform and increase marketing spend. It has also faced a number of legal challenges over the status of its workers. Avoid. 113.6p.
Informa
The Telegraph
An “uncertain outlook for the world economy” is a risk for the business information and exhibitions firm. Some countries in Asia and Latin America are yet to recover from the effects of the pandemic and remaining travel restrictions in some parts of the world do not bode well for its events business. There is scope for it to build its subscription revenues and develop its online presence, but it remains too dependant on in-person events. Sell. 549p
Restaurant Group
Investors’ Chronicle
Restaurant Group’s main brands, such as Wagamama and Frankie & Benny’s, have posted promising figures, but “finance charges pushed it into the red” and it fell to a third consecutive annual loss. Revenue is still significantly below 2019 levels and it would be “unwise to underestimate the economic headwinds”, from higher energy costs to labour shortages. There are some positives to take from its latest results, but the future looks too uncertain. Sell. 74p
...and the rest
Investors’ Chronicle
Cineworld has “material uncertainty” over whether it can repay debt and avoid a “potentially disastrous” lawsuit bill. Sell (39.1p). Funeral provider Dignity’s premium valuation looks unjustified given the likelihood of a lower death rate post-pandemic. Sell (445p). German medical conglomerate Fresenius can unlock value by restructuring. Buy (€32.14).
The Mail on Sunday
Law firm DWF has ambitious expansion plans and a “decent dividend”, with 6.6p pencilled in for the year. Buy (115p).
Shares
Recruiter FDM can “plug IT skills shortages” for customers who are investing heavily in digital transformation and security. Buy (1,002p). Warren Buffett’s Berkshire Hathaway is a “sound defensive option”. Buy ($352.50). Essentra is shedding packaging and filters to become a “streamlined” components company. Buy (310p). Digital infrastructure investor Cordiant Digital Infrastructure has received anti-trust approval for a Polish acquisition that will double its assets. Buy (106.6p).
The Telegraph
Many investors think discount retailer B&M European Value will benefit from the cost of living crisis, but that’s “too simplistic” Its existing lower-income customers are likely to cut back more than most. Sell (577.4p).
The Times
Retailer Next is growing its online presence and diversifying into new areas such as furniture, paint, wallpaper and ski wear. Buy (6,358p). Construction firm Henry Boot should benefit from the strength of the housing market. Demand for its industrial and logistics assets should also protect it against inflation. Buy (315p).
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