Glencore PLC and THG PLC among the bad boys on Liberum’s “best ideas

On Jan 15, 2022

Glencore is a “dirty” business, unloved by investors, while THG went from being a stock market darling to a dog stock in a matter of months.

Liberum Capital Markets’ Sales Desk has chosen 15 UK companies it sees as its best ideas for 2022 – and only six of them are clients of Liberum!

The six are MJ Gleeson (LSE:GLE), Harworth, SigmaRoc, Alpha AF, Oakley Capital, VinaCapital Vietnam Opportunity Fund.

The tips range from £51bn-valued commodities giant Glencore PLC (LSE:GLEN) down to Trifast (LSE:TRI) PLC, which has a market capitalisation of just £217mln.

“Glencore is an undervalued money-making machine,” Liberum declared.

“Glencore ticks a lot of boxes. A unique collection of assets, inflation beneficiary, dirt cheap, EV [electric vehicle] play, “Dirty” play, generating more cash than it knows what to do with and [is] disliked by investors,” sums up Liberum’s rationale for recommending the stock.

“The stock remains disliked. 530p was the IPO price over a decade ago and to me, that seems very achievable,” the broker added.

The shares currently trade at 384.6p.

As for Trifast, the fastenings specialist’s shares are still trading at more than 15% below pre-Covid-19 levels and are 40% or so below the stock’s all-time high in mid-2018.

This year should see the company top the £22mln of underlying earnings it achieved in 2018, with Liberum expecting growth to accelerate, helped by some judicious acquisitions.

“M&A [mergers 7 acquisitions] will help Trifast diversify both geographically, and end-market wise. It can also be used to quickly grow manufacturing capacity and insource more production (for c15% margins vs distribution only c10%),” Liberum said.

Electrocomponents PLC (LSE:ECM), which released well-received results today, is also in Liberum’s list, which shows good timing on the broker’s part.

“Electrocomponents is one of the global leaders in the distribution of industrial and electronic parts, serving more than a million customers in over 80 countries. With a high-quality management team led by Lindsley Ruth (CEO) and David Egan (CFO) this is a disruptive, omnichannel business that has already demonstrated what can be achieved when you are one of the strongest players in a very fragmented and evolving marketplace,” the Liberum team said.

READ Electrocomponents upgrades guidance despite growing external pressures

“Concerns that COVID would present major problems for the business have been wide of the mark. Customers have been shifting online and changing buying patterns, and over the past few years Electrocomponents have been making material market share gains, having already done a lot of the heavy lifting pre-COVID to benefit from this trend,” it added.

Liberum says that “availability is the number one reason customers give for coming to Electrocomponents” and that price “is not even a top-five consideration”.

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