As I mentioned in my May picks review, the markets have continued to push ahead as investor optimism strikes an ever larger discord with the global economy.
This has helped our King of 34 Recovery Stock Competition picks continue to perform very well in general. The top 5 stocks after week 4 are ITM Power (+116.4%), Zoom (+45.3) Square (+31.5%), Burberry (+26.6%) and Rio Tinto (+25.9) with Zoom replacing Walt Disney on our top 5 leaderboard this week.
If you haven’t seen our competition before now, you can read about it here.
This week, we are focusing on five stocks that have been swept along by the current tide of optimism: Chorus Aviation, Flutter Entertainment, BP Regeneron and AVEVA.
Global provider of regional aviation solutions, Chorus Aviation, has seen their largest customer, Air Canada raise C$1.4 billion $500 million in an oversubscribed share offering and $900 million debt. This has given Air Canada substantial further liquidity in addition to almost $3 billion in cash prior to the Covid-19 crisis. Investors will have been bouyed by this news as Air Canada provides 65% of Chorus revenues which are contracted primarily on a take or pay basis.
Bookmaker Flutter Entertainment, which was formed out of the merger of Paddy Power and Betfair, has been boosted in recent weeks on news that sporting events can resume. The business has raised £812.6m through a placing of over eight million shares and its latest trading update on 28 May saw pro-forma Group revenue increase by 10% year-on-year despite the widespread ongoing disruption to global sports. The business is well positioned for future growth, particularly in the rapidly expanding US market.
Oil giant BP has seen its share price volatility increase in 2020 in line with the price of Oil. April saw a spectacular decline in oil prices which was caused by the expiry of the May WTI contract and though the plunge sent a negative message about the state of the near term oil market, prices have subsequently risen throughout May suggesting the supply and demand problems may have been just a temporary blip. The business has taken decisive actions in recent months to strengthen finances – reinforcing liquidity, rapidly reducing spending and costs in order to weather the COVID-19 crisis and the business continues to remain committed to delivering on their net zero ambition.
US biopharmaceutical company Regeneron announced an expansion of its collaboration with Intellia Therapeutics Inc last week in which the business will pay $70 million upfront and make a $30 million equity investment in Intellia. The stock has also seen positive re-ratings from brokers. With sales of its biologic drug for ocular health, Eylea, and its anti-inflammatory drug, Dupixent, soaring and a promising antibody solution against COVID-19 in development, Regeneron remains an exciting prospect for growth.
Engineering software and solutions provider AVEVA saw its share price fall more than 40% at the beginning of the coronavirus crisis in line with the financial markets at the time. The business works with industries across the world from water and energy to food and infrastructure and made The Armchair Trader’s Recovery Stocks list as a value stock, currently trading at a discount. Since its lows in March, the share price has been steadily climbing but still sits well short of its 2020 highs. With a diversified end market exposure, a high-quality customer base, significant recurring revenues, strong cash generation and low customer concentration, AVEVA is well placed for the economic recovery.
Our King of the 34 performance table to 4 June 2020
|Reckett & Benckiser||+4.8|
|Pets at Home||-1.6|
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Data sourced from SharePad. The UK’s no.1 investment data & analysis software for Private Investors as voted for by FT/Investors Chronicle readers. Discover the advantage at www.sharescope.co.uk/sharepad.