Time for a UK market stampede?
4th March 2021 |
I’ll be the first to admit that in lockdown, I’ve got a little lazy.
I don’t get out and exercise as much as I used to. I can’t. I used to go to the gym. I used to go to the driving range. I used to play golf twice a week.
Now, none of that. They’re all shut.
I have also noticed I use food delivery apps more than I used to. Just Eat and more recently UberEats. That’s because the last time I went to Subway to get a footlong the queue was so big, that it would have taken me an hour of just waiting in the queue to get served.
At least with a delivery app I can order, keep working away and then it’ll be brought to me when ready. No wasting time standing in a queue for ages on end.
When the government chooses to let businesses reopen properly, then my activities should return to normal. But I suspect that’s really not going to happen properly for some time still.
Nonetheless, it’s no great surprise that food delivery has been in the midst of a boom. I’m sure they didn’t even expect the surge in volumes over the last year.
One of the beneficiaries of these abnormal trading conditions is Deliveroo. Just a few weeks ago after a fresh round of investment, the seven-year-old company tipped the scales with a valuation over $7 billion.
This week however, Deliveroo decided that it was going to go to the public markets. Now, considering the fever surrounding new listings on the US markets and the “SPAC boom” that we’ve seen in the US, you’d have forgiven the British company for heading across the Atlantic and listing in the US.
But it’s chosen to keep it domestic and list on the London Stock Exchange.
Part of why Deliveroo has done this is due to a shakeup of the listing requirements for companies here in the UK.
Yesterday a review of the UK listing system was published to the government. It was spearheaded by Jonathan Hill, former European commissioner for financial services. You can read the full review here.
The review notes that London accounted for only 5% of initial public offerings (IPOs) globally. And that since 2008 at its peak, the number of listed companies on the UK market has fallen by 40%.
It also notes the London market is more representative of the “old economy” rather than new and forward-looking progressive companies.
It is all designed to open London for business when it comes to new listings, IPOs and capturing a bigger piece of the world’s best companies looking to go public.
The Deliveroo decision is a significant step in that direction. Its IPO is too big for our focus here at Frontier Tech Investor, but it does open up the potential for us to focus in on more recently listed companies that have chosen the UK as the place to list.
In fact, it’s one area that I’m going to specifically home in on short term.
What’s happening now though also reinforces an investment thesis I’ve been building on for the last two years.
The idea is simple: the UK is primed to become the most exciting market to invest in over the next decade.
This listing review couldn’t have come at a better time. I not only believe we will see these recommendations from the listing review implemented, but that the UK market will loosen up, open up and see a boom of new companies hitting the market that domestic investors will have a first crack at.
We may see the SPAC boom jump the Atlantic and find its way to the UK market. We may see an IPO boom as exciting new companies choose the UK as their primary place to list. We may see a stampede for UK stocks as investors turn their attention back to this market and all the potential packed inside.
My take is that we’re in the first stages of a massive resurgence in UK stocks and the wider UK market. It’s perhaps the best period we’ll ever see to be a domestic investor in the UK, and you’re positioned right at the front of the queue to get in on it.
Stock Focus
Aston Martin Lagonda
I love a bit of Formula 1. Obsessed? Perhaps. A lifelong obsession. If you’ve seen any of my videos from my home office, you may have noticed a plethora of F1 paraphernalia in the background.
Anyway, I’ve not been this excited for a new season for a while. New drivers (the name Schumacher is back), returning drivers (Alonso is back!) and new cars.
It’s the new cars that are super exciting and when it’s from a “new” team, it’s even more exciting. Yesterday Aston Martin marked its return to F1 after 60 years away with a look at the new AMR21 F1 car.
It’s beautiful. Hopefully the company can progress the team forward and start to compete closer to the top again. But it wasn’t just the car that caught my attention at the premiere (which you can see on YouTube here).
It was how executive chairman Lawrence Stroll talked about the car division, the F1 team, the culmination of the two to this point and the Aston Martin brand going forward.
It reinforced everything I expected from the company and reaffirmed the long view and potential of the stock.
Napster Group
What was once MelodyVR is now Napster Group Plc (LSE:MVR). The company has now renamed and rebranded to Napster.
The website you’ll find at www.napster.group.
You’ll see it’s pretty much the same as the old MelodyVR site, but with a new name and the good old Napster logo.
I see this as a great change. I think the Napster brand, which has gone through quite a chequered history, still has the potential to really put the company as a central player in the next evolution of music and entertainment streaming with huge potential in the virtual music space.
Meggitt
Meggitt released its full-year results for the 2020 year.
As you’d expect, the results were heavily impacted by Covid-19. Operating profit was down 53% to £191 million and revenues were down 22%.
Meggitt is expecting, as am I, that the recovery for the aviation and aerospace industries will be somewhat back-ended in 2021. Meaning that it will be tough trading while vaccines roll out around the world, and that real recovery for the industry won’t kick in until later this year and into 2022.
Nonetheless, Meggitt is still well placed for that recovery. And the market wasn’t that fussed with its results either. In fact, the stock was up in trading today (at the time of writing).
Again, companies like Meggitt and Rolls-Royce, which are heavily weighted to the aerospace industry, will continue to grind forward. But they’re both crucial companies, well-resourced and have the capacity to see out these abnormal conditions.
The stock buy limit was readjusted last year due to the market volatility around this time last year. We’re sticking with that and the current hold recommendation while trading conditions are rough and it trades over the readjusted buy limit.
The Frontier Tech Investor “Top Three”
Sometimes it’s hard to decide on which stocks to invest in from our buy list
Below is our Frontier Tech Investor “Top Three” section showing three stocks in open BUY positions that if you’re trying to figure out what to invest in next, are the three we think are a great place to start.
This doesn’t mean our other stocks are no good, it’s just a guide to help you out in your decision-making process for the next stock we think is worth your consideration.
Napster Group – Napster is a part of the global music streaming industry. A huge opportunity for the company exists in virtual reality music and entertainment streaming. This includes live concerts. I call it the Spotify of VR. The potential is huge. The Napster brand is a good old throwback to yesteryear, looking to build on that long legacy and grow its offering. I think there’s great potential in this still relatively unknown company, now with a globally recognised brand name.
IQE – our most recent recommendation, IQE, is a key part of the supply chain getting semiconductors into the world. With a gigantic increase in the demand for semiconductors the world is facing a “chipageddon”. It’s a situation where there simply aren’t enough semiconductors to supply the world’s biggest, most demanding companies. IQE is one of the few ways to pure-play the world’s semiconductor industry in the UK market.
Velocys – there’s no doubt that governments are going to continue to push their “green agenda”. This means doing what they can to support industry that will help enable carbon neutral economies. Velocys is a big part of this developing sustainable fuels for transport and logistics (in particular aviation) with pioneering technology. If you’re looking for a great “green energy” play, Velocys is a great place to start.
Regards,
Sam Volkering
Editor, Frontier Tech Investor
