Liberum Capital Markets’ Sales Desk has chosen 15 UK companies it sees as its best ideas for 2022 – and only six of them are clients of Liberum!
The six are MJ Gleeson (LSE:GLE), Harworth, SigmaRoc, Alpha AF, Oakley Capital, VinaCapital Vietnam Opportunity Fund.
The tips range from £51bn-valued commodities giant Glencore PLC (LSE:GLEN) down to Trifast (LSE:TRI) PLC, which has a market capitalisation of just £217mln.
“Glencore is an undervalued money-making machine,” Liberum declared.
“Glencore ticks a lot of boxes. A unique collection of assets, inflation beneficiary, dirt cheap, EV [electric vehicle] play, “Dirty” play, generating more cash than it knows what to do with and [is] disliked by investors,” sums up Liberum’s rationale for recommending the stock.
“The stock remains disliked. 530p was the IPO price over a decade ago and to me, that seems very achievable,” the broker added.
The shares currently trade at 384.6p.
As for Trifast, the fastenings specialist’s shares are still trading at more than 15% below pre-Covid-19 levels and are 40% or so below the stock’s all-time high in mid-2018.
This year should see the company top the £22mln of underlying earnings it achieved in 2018, with Liberum expecting growth to accelerate, helped by some judicious acquisitions.
“M&A [mergers 7 acquisitions] will help Trifast diversify both geographically, and end-market wise. It can also be used to quickly grow manufacturing capacity and insource more production (for c15% margins vs distribution only c10%),” Liberum said.
Electrocomponents PLC (LSE:ECM), which released well-received results today, is also in Liberum’s list, which shows good timing on the broker’s part.
“Electrocomponents is one of the global leaders in the distribution of industrial and electronic parts, serving more than a million customers in over 80 countries. With a high-quality management team led by Lindsley Ruth (CEO) and David Egan (CFO) this is a disruptive, omnichannel business that has already demonstrated what can be achieved when you are one of the strongest players in a very fragmented and evolving marketplace,” the Liberum team said.
READ Electrocomponents upgrades guidance despite growing external pressures
“Concerns that COVID would present major problems for the business have been wide of the mark. Customers have been shifting online and changing buying patterns, and over the past few years Electrocomponents have been making material market share gains, having already done a lot of the heavy lifting pre-COVID to benefit from this trend,” it added.
Liberum says that “availability is the number one reason customers give for coming to Electrocomponents” and that price “is not even a top-five consideration”.
Smaller, local competitors just cannot compete with a company that has 12 distributions around the globe, Liberum argues.
If it is a contrarian play you are looking for then THG PLC (LSE:THG) could fit the bill.
Trading at 183p after floating in September 2020 at 500p, Liberum observed that the company changed from being loved to hated in three months and conceded it will take time for the company to convince shareholders that the business can deliver.
Liberum’s retail team has put a sum of the parts valuation of 750p per share which even the broker’s sales team thinks is “probably a bit high” but it thinks the Beauty division alone is worth roughly what the market is currently valuing the whole company at.
“Unfortunately, by now everyone has lost faith in the company,” Liberum conceded.
Founder and boss Matt Moulding hit the headlines this week griping about investors short-selling the stock – selling shares they don’t own in the hope of buying them back at a cheaper price later on.
READ THG tells UK regulator it fell victim to 'coordinated attack' by hedge funds
“Matt Moulding should focus on running the business rather than pontificating the short-sellers,” is Liberum’s advice.