Two investing themes I think will be strong in 2019

Robert Faulkner thinks these two sectors are set for a very promising year.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Dial being turned up to 'high'

Image source: Getty Images.

Online gambling stocks look a bit beaten up following a wave of legislation changes across Europe that have hit earnings forecasts. Investors have been quick to sell and the sector is arguably heading into oversold territory, but this is not the reason that I am interested as it can be dangerous to try and call the bottom.

Worth a gamble?

The reason that this sector is interesting me at the moment is the opportunity in America: it is deregulating online gambling, potentially paving the way for UK companies to meet the call. 888 Holdings (LSE:888) is one company that I think could be a winner as it is currently the second largest poker site in the world. It had lost about 50% of its value following a string of bad news reports, but the company has updated the market and said it is now trading in line with revised forecasts. It is positioning itself for the American market having opened its first US sports betting website and will spread across the region based on changes in legislation.

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

Being a big player in the UK and Europe should help with expansion into the US as 888 has a good international reputation and good cash reserves. Looking at the valuation, it trades on a very modest price-to-earnings ratio of 11 suggesting that the price is cheap following the sell-off. It has a dividend of 7.3%, although following earnings downgrades, I could see this being reduced. Given the size of the potential opportunity for 888 I’d consider buying but would avoid going all-in.

Litigation finance

Another sector I’ll be watching is litigation finance. This sector has long been viewed with scepticism, partly because of concerns over regulation which are starting to look unfounded. 2018 saw a flurry of sector activity with listings from Manolete Partners and Litigation Capital Management to name just two, this suggests to me that the industry could be going through a change in perception. The opportunity for these companies is huge with only a fraction of legal cases currently insured so I think it should be a while before growth slows.  

The main international player in this market is AIM-listed Burford Capital (LSE:BUR). After a good start to last year where the price almost doubled, October saw the start of a 35% price fall on no news. The price bounced back 20% last week following the announcement of an agreement with a sovereign wealth fund that is skewed in the company’s favour. This agreement showed the strength of business and its position at the top of a sector in which I think large and respected companies are most likely to prosper.

I spoke in more detail about the prospects for Burford back in September as its sector has some interesting characteristics. It can be viewed as defensive as lawsuits don’t tail off during times of economic hardship and are potentially more common. Therefore the big fall in price recently seems entirely based on investor nervousness and presented a good buying opportunity. However one downside is very little revenue visibility because of the confidentiality of legal claims. Therefore when investing in litigation finance, it is very important to focus on the management, because this is essentially what you’re investing in.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Robert Faulkner owns shares in Burford Capital. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

A beach at sunset where there is an inscription on the sand "Breathe Deeeply".
Investing Articles

Stock market crash: here’s why falling prices is good news

Over in the US, a stock market crash is battering high-priced stocks. But I see falling shares as an opportunity…

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Investing Articles

These 5 FTSE 100 shares crashed in 2022. I’d buy 1 today

Although the FTSE 100 index is flat in 2022, some Footsie shares have crashed hard this year. But I see…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

How investors can boost their passive income when the FTSE is falling

Stock markets are plagued with fears right now. Here's why I firmly believe those fears improve our passive income prospects.

Read more »

Image of person checking their shares portfolio on mobile phone and computer
Investing Articles

2 cheap UK shares to buy right now!

Recent market volatility means many top stocks now trade at rock-bottom prices. Here are two cheap UK shares I'm thinking…

Read more »

Rolls-Royce's business aviation engine, the Pearl 700
Investing Articles

The Rolls-Royce share price is just pennies. Am I missing something?

As the Rolls-Royce share price lingers in penny stock territory, our writer revisits the investment case that has attracted him…

Read more »

Compass pointing towards 'best price'
Investing Articles

How to put a valuation on the Woodbois share price

The Woodbois share price has fallen from its recent spike, so should I buy now? And how can I work…

Read more »

Inflation in newspapers
Investing Articles

I’d fight inflation with these 2 FTSE 100 dividend shares

With inflation hitting a 9%, I'm boosting my passive income and turning to these two FTSE 100 dividend stocks.

Read more »

New Ways of Investing - Hands Only Using Smart Phone
Investing Articles

2 cheap Footsie stocks to buy for BIG dividends!

The recent stock market sell-off leaves plenty of top stocks looking too cheap to miss. Here are two great Footsie…

Read more »