The Financial Mail on Sunday’s Midas column told readers to ‘buy’ shares of Defence outfit Chemring, arguing that the tide was turning for the sector as a whole due to heightened geopolitical tensions.
That, the tipster said, might see the sector re-rate.
Midas also called attention to the company’s move to diversify, moving into the cybersecurity space, instead of focusing on justt the manufacture of sensors for electronic warfare and so-called countermeasures like flares and decoys.
For some time now, even some institutional investors had shunned the sector due to their emphasis on environmental, social and corporate governance.
“Suddenly we’re reminded of what the word ‘defence’ really means and questioning whether there is a place for defence shares in a larger number of our portfolios after all,” Midas explained.
Analysts at SEB Bank and Berenberg appeared to concur, the tipster added.
Midas did nevertheless note the risk that Chemring might need to add to its provisions against the Serious Fraud Office’s investigation into allegations of money laundering and a probe into a chemical explosion at Salisbury Plain, which killed one person.
The shares had rebounded but remained down by roughly half from the target prices set by analysts at Peel Hunt and Berenberg of 360.0p and 355.0p, respectively.
“Hindsight is a wonderful thing. Chemring was very cheap until defence was flavour of the month.
“[…] Given that Chemring is in the right place at just the right time, it is worth buying on any weakness in the price, such as Friday’s fall.”
The Sunday Times’s Lucy Tobin recommended buying shares of Keywords Studios, telling readers that the gaming habits brought on by lockdown had stuck.
Indeed, the sector’s sales were expecting to hit £61bn in 2022, more than cinema’s pre-Covid box office takings and the music industry combined.
Based in Dublin, Keywords was involved in the majority of the best-selling games available, including Fortnite or Assassin’s Creed, doing the grunt work of testing and polishing games before they were released.
Furthermore, the sector was seeing a spree of blockbuster deal-making, not least Microsoft’s recent $69.0bn takeover of Activision Blizzard.
And if an Amazon or Tencent wanted to spread its tentacles into every corner of the gaming world, then an “acquisition of Keywords would be an excellent place to start,” Tobin said.
“Before you buy a bonus level of your latest gaming fix, buy Keywords Studios.”