The Motley Fool

Two investing themes I think will be strong in 2019

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.

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story. In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

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.

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story.

In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.