Momentum can a powerful force in investing. What rises in value tends to go on doing so as people rush for a slice of the action, creating a virtuous circle. That’s certainly been the case with a number of UK stocks recently.
Here are three that investors can’t stop buying.
Top UK stock
Like nearly all stocks, IT specialist Computacenter (LSE: CCC) was hit hard by the market crash in March. Since then however, the share price has doubled. When you consider just how bullish last week’s trading statement was, it’s not hard to see why.
As a result of people needing to work from home during lockdown, Computacenter said it has seen huge demand for equipment and services. Adjusted pre-tax profit in the first six months of 2020 was consequently “substantially ahead” of that achieved over the same period in 2019.
Looking ahead, the firm now believes that adjusted profits in H2 will be “much improved” on the forecast given in April and that 2020 will turn out to be “a year of material progress“.
Of course, the usual caveats apply: no investment is ever ‘safe’ and there’s the possibility that a lot of this good news is already priced in.
Then again, concerns over a second coronavirus wave could force the share price even higher. Regardless, the growing trend of companies allowing their employees to work from home more often can surely only be a good thing for Computacenter.
At 21 times forecast earnings, this UK stock isn’t cheap. Nevertheless, I think there’s potential for more gains ahead.
Gold price beneficiary
Back in May, I suggested that £2bn cap gold miner Centamin (LSE: CEY) could be a good hedge against a looming recession. After all, gold has historically been a great store of value in troubled times.
Since then, of course, the precious metal’s price has rocketed to a record high. Centamin has followed suit, rising 20%. If you’d bought this UK stock in the dark days of March, you’d have pretty much doubled your capital.
I suspect this momentum will continue for a while yet. This is especially likely if the US Federal Reserve orders another bout of money-printing. Such a move further increases the risk of inflation — something gold helps to protect investors from.
Centamin’s shares currently trade on 16 times forecast earnings. Considering the precarious state of the global economy and the company is debt-free and still paying dividends, that still doesn’t feel excessive.
A final UK stock that investors can’t get enough of is online wine-seller Naked Wines (LSE:WINE). Again, the share price has almost doubled since mid-March. That’s a seriously good result considering most small-cap companies haven’t rallied as strongly as those in the FTSE 350.
Then again, this shouldn’t come as a complete surprise. Like Computacenter, Naked Wines has been a huge beneficiary of people spending more time at home. Last week’s trading update revealed a 67% jump in total sales in June compared to the same month in 2019. For Q1 as a whole, sales were 77% higher.
With numbers like these, it’s becoming increasingly difficult to challenge management’s belief that Naked is “ideally positioned to be a long-term winner from the inflection in consumer demand for online wine”.
As the potential for more local lockdowns in the UK grows, Naked’s purple patch could well be extended.