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Our monthly Best Buys Now are designed to highlight our team’s three favourite, most timely Buys from our growing list of small-cap recommendations, to help Fools build out their stock portfolios.
“Best Buys Now” Pick #1:
Bloomsbury Publishing (LSE:BMY)
Why we like it: “Bloomsbury (LSE: BMY) owns the print rights for the Harry Potter books in the UK, and remarkably, the first book in the magical wizard series is the third-bestselling children’s book of this year, some 26 years after it was first published. Talk about valuable intellectual property! The company is also nurturing star author Sarah J Maas, publishing 15 titles so far by the popular fantasy novelist, whose catalogue of titles saw a whopping 51% rise in sales in the last year.
“But while strong sales of consumer titles are welcome, its non-consumer division – representing roughly 37% of total sales last year – could provide a substantial long-term growth driver. The company has transformed into a serious player in education in recent years. Through its digital platform – Bloomsbury Digital Resources (BDR) – the company provides educational resources to academic libraries and institutions. Bloomsbury expects that BDR should achieve organic sales growth of around 40% by 2027/28 – and it also represents a tantalising margin opportunity, in our view.”
Why we like it now: Bloomsbury recently announced record sales (up 15% to £264.1 million) and profit (up 16% to £31.1 million) for the fiscal year ending 28 February 2023, surpassing both market expectations and industry averages. This success is attributed to a surge in digital revenues and international expansion. The company’s long-term strategy of investing in digital content has paid off with a 41% sales growth in Bloomsbury Digital Resources (BDR), driven by both organic and acquired assets. Bloomsbury has recently signed four book contracts that could fuel earnings for the coming years. HBO Max announced a new Harry Potter TV series in April. A Bollywood adaptation of William Dalrymple’s The Anarchy is being planned, and The Three-Body Problem, the bestselling trilogy, is currently in production at Netflix. In recognition of the robust performance, the board has proposed a 10% increase in the final dividend to 10.34p per share, consistent with their progressive dividend policy. A recent trading update revealed that performance was in line with expectations for the first four months of the full year.
