3 UK stocks to buy before ‘Freedom Day’

G A Chester is eyeing these UK stocks to buy. He reckons they can emerge stronger from the pandemic than financially-constrained competitors

| 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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Recovery plays in the travel & leisure sector are currently high on my list of UK stocks to buy. Many have already regained a fair bit of ground from last year’s pandemic crash. But I still see good value in a number of them.

I’ve written recently about two FTSE 350 firms I’d be happy to buy ahead of 19 August’s ‘Freedom Day’. Here are three smaller companies I believe are similarly set to come out of the pandemic even stronger than when they went in.

Pre-pandemic momentum

Cinema chain Everyman Media Group (LSE: EMAN), fitness chain The Gym Group (LSE: GYM) and pubs and hotels chain Young & Co (LSE: YNGA) all had good business momentum before the pandemic. This is clear from their pre-pandemic trading updates.

EMAN reported record sales and a big uplift in its market share of the UK box-office. GYM announced another year of strong growth in members and revenue. YNGA delivered good growth against tough prior-period comparatives and increased its dividend for the 23rd consecutive year.

All three businesses were knocked for six when the UK went into lockdown. However, I was impressed by how their managements handled this period of unprecedented turmoil (“the most challenging in our 189-year history,” in YNGA’s case). Furthermore, I believe they’re now very well-positioned to regain the strong business momentum they had before the pandemic struck.

Pandemic management

EMAN, GYM and YNGA moved quickly to strengthen their balance sheets in the first months of the pandemic. All three were backed by shareholders willing to inject fresh capital into the businesses. Lenders were also very supportive.

The financial backing enabled EMAN, GYM and YNGA to continue a limited amount of expansionary capital spend. Since the first lockdown, the companies have opened a smattering of new sites, as well as invested in targeted refurbishments and staff retainment and training.

I suspect this has put them in a stronger position for coming out of the pandemic than some of their less financially-robust competitors.

Post-pandemic plans

EMAN is “looking forward to unveiling an enhanced venue experience in the coming months.” It’s going cautious on expansion of its 35 sites this year but has a pipeline of seven new venues for 2022/23.

GYM has recently done another equity fundraising to accelerate site rollout. It believes “the Covid-impacted commercial property market provides a unique opportunity to increase the company’s pipeline of attractive sites on favourable commercial terms.”

Meanwhile, YNGA has just announced it’s selling its tenanted estate. This will provide it with “additional firepower” to upgrade its managed freehold pubs and hotels. And also “capitalise on attractive acquisition opportunities that may come to the market.”

My UK stocks to buy come with risks too

There’s an obvious risk for me investing in EMAN, GYM and YNGA right now. Namely, a new virus variant that produces a return of restrictions or lockdowns. Or, in the absence of government diktats, a reluctance of consumers to visit leisure and hospitality venues. In either of these scenarios, my investment would surely suffer — certainly in the short term.

However, I’m prepared to accept this risk. I think the momentum in these businesses before the pandemic, the continuing support of their shareholders and lenders through it, and their current levels of liquidity mean they’ll ultimately emerge stronger than more financially-constrained competitors.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended The Gym Group. 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

Investing Articles

Here’s how I’d aim for a ton of passive income from £20k in an ISA

To get the best passive income from an ISA, I think we need to balance risk with the potential rewards.…

Read more »

Abstract bull climbing indicators on stock chart
Investing Articles

2 FTSE 100 stocks I’d buy as the blue-chip index hits record highs

This Fool takes a look at a pair of quality FTSE 100 stocks that appear well-positioned for future gains, despite…

Read more »

Satellite on planet background
Small-Cap Shares

Here’s why AIM stock Filtronic is up 44% today

The share price of AIM stock Filtronic has surged on the back of some big news in relation to its…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

At a record high, there can still be bargain FTSE 100 shares to buy!

The FTSE 100 closed at a new all-time high this week. Our writer explains why there might still be bargain…

Read more »

Asian man looking concerned while studying paperwork at his desk in an office
Investing Articles

After profits plunge 28%, should investors consider buying Lloyds shares?

Lloyds has seen its shares wobble following the release of its latest results. But is this a chance for investors…

Read more »

Abstract bull climbing indicators on stock chart
Investing Articles

Something’s changed in a good way for Reckitt in Q1, and the share price may be about to take off

With the Reckitt share price near 4,475p, is this a no-brainer stock? This long-time Fool takes a closer look at…

Read more »

Investor looking at stock graph on a tablet with their finger hovering over the Buy button
Investing Articles

This new boost in assets might just get the abrdn share price moving again

The abrdn share price has lost half its value in the past five years. But with investor confidence returning, are…

Read more »

Young Black man sat in front of laptop while wearing headphones
Investing Articles

As revenues rise 8%, is the Croda International share price set to bounce back?

The latest update from Croda International indicates that sales are starting to recover from the end of 2023, so is…

Read more »