How to turn Freedom Day into payday for your investments

Freedom Day may be coming later than some hoped, but if we can throw off all Covid restrictions on July 19, how can we ensure our investments celebrate along with us? 

Susannah Streeter, at wealth manager Hargreaves Lansdown, says: ‘There has been a slow but steady recovery among the worst hit sectors such as hospitality, travel and retail. 

‘But many of the share prices of affected companies remain subdued compared with pre-pandemic levels. 

Date in the diary: Companies that rely on getting big numbers of people together all face an uncertain future on the stock market

‘Some of the worst affected companies have gone cap in hand to shareholders with calls for more money, diluting investors’ shareholdings and pushing down share prices, while the prospects continue to be uncertain.’ 

On a positive note, she adds: ‘Though some companies, particularly in aviation, may be grappling with long-term behavioural shift among travellers and high levels of debt, the economy’s reopening on July 19 could give others a final shove over the line back to pre-pandemic levels of business, with better prospects to come.’ 

Danni Hewson, at wealth manager AJ Bell, says: ‘Many UK companies have taken a battering from lockdown. But some will benefit hugely when ‘Freedom Day’ arrives. From cinemas, bingo halls and bowling alleys to event organisers and caterers, there are a number of sectors that have been largely unloved by investors over the past 14 months. Investors need to consider how big the Covid scars run, how much debt businesses are carrying, and how quickly consumers will return.’ 

Companies that rely on getting big numbers of people together, such as conference organiser Informa, contract caterer SSP, Hollywood Bowl and football clubs such as Celtic and Manchester United, all face an uncertain future on the stock market. Analysts remain cautious. 

Pubs have had a rollercoaster year with lockdowns, inclement weather, strict social-distancing rules and now a chronic industry-wide shortage of staff. But Ben Yearsley, of Plymouth-based Shore Financial Planning, notes that Henry Dixon, manager of investment fund Man GLG Undervalued Assets, recently said that brewer Fuller’s represented a ‘brilliant buy’. 

Yearsley says the fund is ‘the sort of investment vehicle you should buy in response to an economy that is reopening’. As well as brewers, the fund holds shares in builders, building suppliers and financial businesses. 

Jason Hollands, of wealth manager Tilney, says a lot of independently owned rural pubs won’t be reopening their doors. But he predicts a brighter future for larger pub chains. 

Hollands says key stocks include Whitbread – which owns Brewers Fayre, Premier Inn and Costa – Mitchells & Butlers, JD Wetherspoon, Young’s, Marston’s and Fuller’s. 

Keith Bowman, at Interactive Investor, says Mitchells & Butlers, the owner of All Bar One, O’Neill’s and Nicholson’s, is ‘favoured’ by analysts, adding: ‘A strengthening of its balance sheet has recently been completed and the business is confident it can emerge from the pandemic in a position of strength.’

JD Wetherspoon’s shares are 19 per cent down on pre-pandemic levels. Streeter says easing restrictions could give the shares a push, ‘given the company will be able to squeeze more customers into its vast bars and pubs with offers of cheap alcohol’. 

While more people holidaying in the UK may boost its income, a cloud on JD Wetherspoon’s horizon may be a lack of staff to satisfy demand. 

Travel is looking so uncertain that Yearsley is holding fire on all travel stocks at the moment. He says: ‘There is a lot of in-built goodwill already and many people are nervous of the rules changing again – as happened with Portugal a few weeks back.’ 

Hollands agrees, saying: ‘The travel sector will face serious headwinds for some time. Much of the key summer season has already been lost leaving many businesses in a battered state with debts piling up and pressure to refinance. Airlines are not going to see a quick recovery.’ 

He adds: ‘But airlines could get a boost from new destinations being added to the travel green list last week.’ 

Streeter says that once restrictions are lifted, budget airline easyJet ‘could be in a better position than others with its focus on short-haul and readiness to scale up to meet demand from holidaymakers’. 

Yearsley is more positive about cinema chain Cineworld. He says: ‘It will benefit from most people staying in the UK this summer.’ 

Streeter is more cautious, saying: ‘A full re-opening of the economy should boost its revenues and assist in paying down its huge debts. But there is a fear many people may have got a little too comfortable watching film releases from their sofa.’ 

Among restaurants likely to benefit post Freedom Day is Restaurant Group, owner of Wagamama, Frankie & Benny’s and Chiquito.

Investment funds with high exposure to ‘bounceback’ stocks include ASI UK Unconstrained Equity, Invesco Income & Growth and Franklin UK Mid Cap. 

Hollands warns: ‘Freedom Day sensitive stocks have already seen sharp rebounds since the start of the year. Markets tend to look ahead several months and so reopening has been significantly factored into current share prices.’