Two names catch my eye with recent news. I talked here about my thoughts on easyJet (EZJ), which is a share that I own despite all the obvious pushbacks. A latest update about failing to hit anticipated capacity utilisation targets cannot come as any huge surprise...
But clearly it is bad news as if you are not generating revenue by selling so many seats, then you are going to struggle more to make a profit. The shares have fallen below six quid but - to channel my inner Zak Mir - I note three times in the last six months where five quid has been an ultimate support. So here we are in the lap of at-the-margin news about the virus, travel restrictions, Brexit et al. You may have noted Ryanair (RYA) in the last few business days took the opportunity to follow easyJet and raise some extra money just to ensure it is in a position of maximum flexibility. As I noted back in June, in a choice between a share price of a handful of quid or a return to ten quid...I back the latter as more likely to happen.
By contrast, a big winner is the packaging name DS Smith (SMDS), which I loved up back here and even (mildly arrogantly) opined that Mr Market was wrong. Of course I got this optimism handed to me on a plate over the six weeks after this piece, but finally my stock selection faith has been rewarded with a nice 7% share price bump. And you can guess the rationales: improving demand, better pricing, structurally positive comments about the recycling space and a bit of quiet optimism about the future as reflected by a nudge that an interim dividend is coming back.
As much as I can rhapsodise about recycled board packaging (as found in the typical Amazon package), there are obvious cyclical impacts even if the business has its greatest sector exposure to the fast moving consumer goods space. Naturally, I will be interested to see where exactly the dividend comes back to but, as I noted in July, a barely double digit EV:ebit profile and based on history 5%+ dividend yield still works for me even factoring in the uncertain backdrop. I talked about a return to four pounds a share as a target and that remains my view. Buy.
Filed under: easyJet, DS Smith, Verditek, Haydale Graphene, GoCompare, Quiz plc, Tern
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