Domino’s Pizza Group PLC (LON:DOM), JD Wetherspoon PLC (LON:JDW), Metro Bank PLC (LON:MTRO) and Dechra Pharmaceuticals PLC (LON:DPH) are among the shares most worth avoiding on the London Stock Exchange, according to broker Liberum’s 2021 new-year honours and dishonours list.
The small and mid-cap specialist picks its 12 “most preferred” stocks and another dozen “least preferred” it recommends avoiding each quarter, with the list excluding less liquid names and “driven by analysts’ preferences, rather than total shareholder return”.
As well as Domino’s and Metro Bank, Grafton Group PLC (LON:GFTU) and Hammerson PLC (LON:HMSO) make up four new additions to the broker’s naughty list, where they join Wetherspoons, Dechra, Smiths Group PLC (LON:SMIN), Rightmove PLC (LON:RMV), Renew Holdings PLC (LON:RNWH) and Royal Mail PLC (LON:RMG). There are two European names on this least-preferred list: Nokia and Symrise.
Domino’s, Metro and Dechra are all rated ‘sell’, with target prices well below their shares’ respective latest close, while the rest have ‘hold’ recommendations.
The most-preferred stocks included more new additions, all of which are rated ‘buy’: Superdry PLC (LON:SDRY), Restaurant Group PLC (LON:RTN), Kin and Carta (LON:KCT), Land Securities (LON:LAND), Costain Group PLC (LON:COST), Frontier Developments PLC (LON:FDEV) and Go-Ahead Group PLC (LON:GOG).
Based on the broker’s target price, the biggest expected potential is seen at Restaurant Group, where a 110p target price is based on the Wagamama owner’s new-look estate being “primed for a recovery from pent-up demand and market share gains” and a reduced cost base and liquidity headroom making it “one of the best recovery plays in the sector”.
Superdry has a 400p target as the brand returns to its heritage (or “the uniform for undercover policemen and those trying to be a cool middle age man”) under old management and “better product …being underpinned by more effective social media and a sustainability and ethical trading focus”, along with an ability to “turn inventory into cash” and the shares offering “deep value”.
Bus and rail operator Go-Ahead has a 1550p price target as its earnings offer “an attractive mix of contracts” with the business being supported at breakeven by temporary government funding and “upside potential as passenger volumes eventually recover”.