Upbeat long term potential

Notably, Findel has sold Kitbag for £14m during the year and is now solely focused on its two remaining divisions of Express Gifts and Findel Education. The former recorded a fall in operating profit of over 5% during the year, but this was mainly due to the negative impact of foreign exchange. Meanwhile, sales at Findel Education declined by 8.1%, although customer numbers in the key Schools brands stabilised.

With exceptional items excluded, Findel recorded a pretax profit of £24.8m during the year, which shows that it has upbeat long term potential. And with its adjusted earnings forecast to rise by 11% in the current year and by a further 21% next year, investor sentiment towards the company could improve substantially, thereby making Findel an appealing buy for less risk averse investors.

Also falling today are shares in Trakm8 (LSE: TRAK), with the vehicle telematics specialist seeing a fall in its share price of 9% despite no news flow having been released by the company. Clearly, this has been a tough year thus far for Trakm8’s investors, with its share price having fallen by 40% year-to-date. And with investor sentiment showing little sign of improving in the short run, further share price declines cannot be ruled out.

Rising profitability

Looking ahead, however, Trakm8’s share price could record a strong recovery since the company is expected to report rising profitability over the next two financial years. In fact, Trakm8’s bottom line is forecast to rise by 84% in the current year and by a further 48% in the following financial year.

This has the potential, if delivered, to cause a step-change in investor sentiment and with Trakm8 trading on a price-to-earnings growth (PEG) ratio of just 0.3, it seems to offer a relatively appealing risk/reward ratio for less risk averse investors.

Meanwhile, shares in Game Digital (LSE: GMD) have soared by over 7% today despite no news flow being released by the video games retailer.

Wait for evidence

Clearly, the company is enduring a challenging period, as evidenced by its second Christmas of disappointing sales figures and the reduction or removal of significant levels of insurance cover in its aftermath. And with the outlook for the UK retail sector being challenging, it would be unsurprising if Game Digital’s shares resumed their downward trend.

With Game Digital forecast to report a fall in its bottom line of 48% this year, it may be prudent to wait for evidence of improved performance before buying a slice of it. Certainly, positive earnings growth is forecast for the following year, but with a number of other retail stocks offering better financial performance at the present time, there may be superior options elsewhere for long term investors.

The post Why are Findel plc, Trakm8 Holdings plc and Game Digital plc among today’s biggest movers? appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of Findel. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Britvic

Shares in soft drink manufacturer Britvic (LSE: BVIC) have risen by 80% over the last three years. The group’s earnings per share have kept pace, climbing from 24.7p in 2012 to 46.7p for the year which ended on 27 September.

Today’s results show good progress across the board last year. Britvic, which owns brands including Robinsons, Tango and J2O, said that pre-tax profits rose by 10.6% to £147m last year.

The firm’s dividend kept pace with this growth and was hiked 10% to 23p, giving a yield of 3.2%. Sugary drinks still appear to be strong sellers, but Britvic’s management did sound a note of caution about the outlook for the year ahead.

Chief executive Simon Litherland said that the group had “seen a slow start to the year”. Mr Litherland said that increases in disposable income were not being felt in grocery spend on soft drinks, which remain flat. Health concerns relating to sugar are also a growing issue.

Britvic trades on a 2016 forecast P/E of 14.7 and a prospective yield of 3.5%. That seems reasonable to me, although not compellingly cheap.

HSBC Holdings

HSBC Holdings (LSE: HSBA) shares have fallen by 12% this year, as concerns have risen about the bank’s exposure to the emerging market slowdown. The bank’s performance has also lagged its own targets, forcing management to reset expectations.

However, in my view these concerns have provided a buying opportunity for long-term investors. The bank’s shares trade on a 2015 forecast P/E of 10 and offer a 6.4% prospective yield. This generous payout is expected to be covered 1.6 times by earnings this year.

HSBC stock also trades at a useful 16% discount to its tangible book value, providing further downside protection. I recently added to my personal holding and continue to see HSBC as an attractive buy.

Trakm8 Holdings

Small-cap Trakm8 Holdings (LSE: TRAK) sells telematics and data software to fleet operators and insurance companies. This is a fast-growing area, as the growing computerisation of fleet management makes it easier for operators to manage costs, health and safety risks and compliance issues.

Shares in Trakm8 have risen by 300% over the last year and are worth a massive 2,380% more than they were five years ago. For investors who got in early, this has been a big winner. The question is how much more is there to come?

The firm’s half-year results on Tuesday showed sales up 38% to £11.7m and adjusted pre-tax profits up by 89% to £1.4m. These figures apply to the six months to 30 September. Full-year forecasts for 2015/16 suggest earnings per share of 11.3p, putting Trakm8 stock on a forecast P/E of 23.

That looks pricey, but earnings are expected to rise by 40% next year, giving a 2016/17 forecast P/E of 17. If Trakm8 continues to deliver this kind of earnings growth, today’s 261p share price could end up looking cheap.

Cash doesn’t seem to be a problem, either. Trakm8 had net debt of £2.2m at the end of the first half and appears to be breaking even on cash flow, excluding acquisitions. For growth investors, Trakm8 could be worth a closer look.

The post Are HSBC Holdings plc, Britvic Plc & Trakm8 Holdings PLC Today’s Most Compelling Buys? appeared first on The Twelfth Magpie.

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Roland Head owns shares of HSBC Holdings. The Motley Fool UK has recommended Britvic and HSBC Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

A steady big-cap can deliver solid dividend gains and maybe a little capital growth to firm up the foundations of my investment strategy, while a growing small-cap can spice up returns when the underlying business clicks.

With such a strategy in mind, I’m taking a look at Lloyds Banking Group (LSE: LLOY)  and Trakm8 Holdings (LSE: TRAK), to see if they can make a great combination when held together.

Lacking ‘defensive’ qualities

These two firms are at opposite sides of the size spectrum on the London stock market. At today’s share price of 73p, Lloyds sits in the FTSE 100 with a market capitalisation of almost £53bn. With a share price of 291p, Trakm8’s market capitalisation is a mere £82 million and the firm is a FTSE AIM share.

Based on size alone, Lloyds and Trakm8 measure up for this strategy, but I don’t think Lloyds has the safe characteristics I’m looking for to underpin my portfolio. The main problem is that the banking business is notoriously cyclical and banks’ profits, and their share prices, can rise and fall according to the tune played by wider macro-economic trends. As such, a bank such as Lloyds may not be the best fit in terms of ‘defensive’ characteristics for my two-pronged strategy.

I can’t deny that Lloyds is popular with private investors. The government’s plans to sell off part of its holding in the bank to private investors will keep interest bubbling, especially since the proposed deal involves a 5% discount to the market price of the shares. Then there’s a proposed 1-for-10 bonus share issued, capped at a value of £200 for those who go on to hold their new Lloyds shareholding for more than one year. However, that is all just ‘noise’ to me and will not be worth anything if Lloyds’ shares go on to plunge by 80% or more down the road. Such share price moves are common with the cyclical firms.

Lloyds’ shares have been essentially flat since early 2014 and I fear that situation might persist, even as profits continue to rise. The stock market seems to adjust for cyclicality during a macro-economic up-leg, such as now, by gradually compressing the valuations of cyclical firms such as the London-listed banks like Lloyds.  In order to thrive, Lloyds depends on a buoyant macro-economic environment. Meanwhile, growth seems set to be hard to achieve in the competitive banking landscape that prevails in Britain, and with the regulatory headwinds that persist. Such challenges are here, right now. So, when the next macro downturn arrives I don’t want to be holding a hand full of Lloyds Banking Group shares. I’m avoiding the firm.

Growing like mad

Trakm8 Holdings is a company enjoying success by providing fleet management solutions and vehicle tracking systems to organisations around the world. Growth has been brisk; with earnings rising around 900% over five years and the firm’s share price increasing by around 1800% over the period.

With earnings set to put on a further 40% year to March 2017, the growth taps still seem to be gushing. At today’s share price of 289p, the firm’s forward price-to-earnings ratio sits at just under 19. The big question when arriving late to a growth story like this is, will the company’s expansion continue. If so, the valuation is manageable. If not, a share purchase today could prove to be a costly mistake. One way around the dilemma is for me to put the firm on my watch list and wait for a temporary setback to knock down the share price before buying.

The post Are Lloyds Banking Group plc And Trakm8 Holdings plc A Great Investing Combination? appeared first on The Twelfth Magpie.

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Kevin Godbold has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.