I tend to look at the biggest rises and fallers most days, and for the past couple of weeks I’ve been seeing a lot of red in the table. And not much green. But Wednesday was different, with three fallen stocks on the rebound.
By shortly after midday, shares in Restaurant Group (LSE: RTN) were up a staggering 60%. We have to put that into perspective, mind, as the company’s stock is still down 70% since the coronavirus crisis kicked in.
It’s not hard to understand why the stock fell. Restaurant Group owns Wagamama, Frankie & Benny’s, Garfunkel’s, and a host of other restaurant chains. And anything involving socialising is pretty much off the cards right now.
The firm released a trading update on 18 March, suggesting an overall fall in like-for-like sales of 25% for the full year. That assumed a fall of 45% in the first half, which might be reasonable considering we’re nearly halfway through the half and the period had started well.
The firm also guessed at a 5% drop in the second half. But we’re a week on now, the lockdown situation has escalated, and that looks optimistic to me. I think this could be a dangerous investment, and one to avoid.
Shares in pub group Marstons (LSE: MARS) have also been hammered by the Covid-19 crunch, losing 60% of their value so far. That’s for one of Wednesday’s top climbers, and includes a 32% jump on the day.
The company released an update a week ago, which couldn’t really say much about the outlook other than “we expect a reduction to our expectations for Financial Year 2020.” It went on to add: “The scale of this will depend upon how the situation develops and over what timescale, and the impact of further measures taken by the Government.” Well, we’ve seen the shape of those further measures now.
Marston’s would be in a worse state had it not embarked on a debt reduction programme last year. The update told us it has reduced capital expenditure by approximately £80m per year. It has now also upped its disposals target for the current year from £45 million to £85–£90 million. I’m not sure who would want to buy its real estate right now, though.
I’m sure the British love for pubs will bounce back strongly, but I’m on the fence on this one.
Meanwhile, shares in Halfords Group (LSE: HFD) gained 25% after news that the firm plans to reopen some of its stores. There have been calls for a boycott from some angry consumers who see it as greed, but it has been designated an essential provider of services by the UK government.
The motor and bicycle chain has defended its decision, with CEO Graham Stapleton saying it has “an essential role to play in keeping the country moving.”
There are plans for partial store openings, and the firm’s Autocentre garages and mobile vans will remain open. While I can understand concerns over employee health, I think it’s good news that people are keeping their jobs and that some important services remain available.
The shares are still 50% down, but this could be another good buying opportunity. Halfords is my pick of these three.
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Alan Oscroft has no position in any of the shares mentioned. 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.