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Plans to lift lockdown restrictions spark optimism but investors should not be cavalier in chasing leading stocks
Thursday 25 Feb 2021 Author: Steven Frazer

Holidays, travel and leisure stocks roared higher following the Government’s outline of how Britain will escape the pandemic restrictions.

Companies including airports outlets operator SSP (SSP), Rank (RNK) and WH Smith (SMWH) posted double-digit gains s investors rallied behind sectors most likely to cash-in from the lifting of lockdown restrictions.

International travel will remain problematic and subject to restrictions, isolation and testing, but even so bookings have shot up, with EasyJet (EZJ) reporting a 300% and 600% surge in flight and holiday bookings respectively, lifting others in the airlines sector on the promise of a salvaged summer season.

‘The key points to the roadmap for the UK Food & Beverage channel was the removal of the substantive meal requirement and no future curfews, coupled with the opening of the majority of indoor leisure and hospitality from 17 May’, said analysts at broker Shore Capital.

After a year of doom and gloom a line in the sand has seemingly been drawn with clear plan of how the UK moves beyond Covid. ‘The roadmap to reopening provides operators with a basis on which to plan, although the exact phasing of the four steps (other than schools on 8 March) remains to be determined and the dates are badged as “at the earliest”,’ said Tim Barratt, analyst at Numis.

‘Now we will likely see investor confidence skyrocket as the private sector looks to get behind these businesses to support recovery and enable future growth’, said Luke Davis, chief executive of wealth management firm IW Capital.

‘Pubs will bounce back along with restaurants and other hospitality, no one will want to stay at home after the year we’ve had, and I really believe that.’

But investors should think carefully about chasing ‘reopening’ stocks that have already rallied strongly over the past few weeks. For example, cinemas chain Cineworld’s (CINE) 15% gain early this week was part of a month long 40%-plus surge, with investors betting on a sharp recovery for the business as lockdown restrictions are lifted in the coming months.

There are clear reasons for optimism backed by the pace of the vaccine rollout and promising data regarding virus transmission by those vaccinated. ‘The pent-up demand from this current lockdown is sure to act as a springboard to recovery for a lot of businesses in the UK’, said IW Capital’’s Davis.

‘People want to get out and spend, businesses want to grow, and investors want to help them do that, it’s a perfect storm for rapid growth.’

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