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Fund manager Stuart Widdowson says there is takeover activity in the company's broader space

Devro (DVO) 169p

Loss to date: 11.7%

Original entry point: Buy at 191.5p, 6 Sep 2018

Our ‘buy’ call on sausage skins maker Devro (DVO) may be 11.7% in the red, yet we’re sticking with our positive stance on the food producer.

A supplier of edible collagen casings for sausages, salamis and hams, Devro has disappointingly downgraded 2018 guidance to flat product volumes to reflect a weaker than expected Russian market, ongoing weakness in Japan and the slower than expected roll-out of its new Fine Ultra product.

However, the positive news is that volumes are growing in North America, Latin America and South East Asia, and new China and US plants are performing well.

We’re also drawing confidence from the fact Devro is an initial holding in the Odyssean Investment Trust (OIT), managed by respected stockpicker Stuart Widdowson, one who invested in it at a material discount to Spanish-listed peer Viscofan.

Widdowson believes Devro is under-researched and under-owned and points out that private equity firms have been ‘active in this niche’, suggesting persistent price weakness could draw a bid from a predator.

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