Card shops, chocolatiers, florists and upmarket restaurants may be the first businesses that spring to mind on Valentine’s Day, particularly if you’ve forgotten again this year.
But the day also makes some stock pickers’ hearts soar with the thought of a vegan sausage roll washed down with a can of luminous Scottish soft drink.
Others proclaim their love for Italian sports cars, while some are on the look out for an unloved investment trust.
This is Money spoke to fund managers about their top Valentine’s Day stock picks and most-loved companies.
Greggs advertises its ‘The Bake Tray’, available on Valentine’s Day through Uber Eats
1. Ferrari
With a dual listing in New York and Milan, Moderna-based Ferrari is currently trading at €358.30 a share, having climbed 45.5 per cent over the last year.
It was handed a boost last week after posting profits of more than £1billion for the first time shortly after announcing the signing of Lewis Hamilton to its Formula One team.
Zehrid Osmani, manager of the Martin Currie Global Long Term Unconstrained fund, says: ‘The Italian sports car manufacturer offers a unique proposition for global high net worth invididual growth.’
Perfect match: Lewis Hamilton joins Ferrari
He adds: ‘Ferrari focuses exclusively on the high-end luxury car market. This focus is important to preserve brand value. The company operates a tight supply and demand model maintaining exclusivity and scarcity, which gives it superior pricing power.
‘High demand for their products, limited production and the loyalty of their customer base (the Ferraristi) brings stickiness in demand.
‘Greater use of their Special Service and Icona platforms gives them an ability to raise their average selling price – already a sizeable premium to other luxury car manufacturers.’
2. L’Oreal
Paris-listed L’Oreal shares are currently trading a €429.6, with the world’s largest beauty firm up by around 10.4 per cent over the last year.
But there was heartbreak for shareholders last week as L’Oreal was overtaken by Hermes as France’s second most-valuable company after the Birkin bag maker’s sales soared in the final three months of 2023.
Osamani says: ‘L’Oreal is the number one firm in global beauty, with market leadership maintained through strong research and development, and its marketing capability.
‘Growth opportunities come from its leadership in the underpenetrated e-commerce market, and an Asian business harnessing increased travel in the region.
‘At the forefront of sustainability, the ‘L’Oreal for the Future’ program has quantifiable objectives to limit its impact on climate change and natural resources, alongside social focused initiatives.
‘It is well positioned to harness growing emerging market wealth and increased travel within the Asian region.
‘The company has a strong presence in China’s Haitang Bay, the world’s largest Duty-Free shopping complex, and has expanded into the new Haikou International Duty-Free City (opened late 2022), twice the size of Haitang.’
3. Greggs
FTSE 250 Greggs shares have endured a more volatile year, with flat performance over the last 12-months, but remain almost 150 per cent above their 2020 lows after a stunning run.
But the group is set to open-up to 160 new sites this year after a record number of openings in 2023 helped revenues soar by almost a fifth to £1.8billion. Greggs is also mulling a potential return to overseas trade.
Equities investment manager at Aegon Asset Management Douglas Scott says: ‘Aphrodite the Greek goddess of love is said to have had a sophisticated pallet. Her favourite foods supposedly stimulated desire with their natural and lush properties.
‘Oysters, dark chocolate, honey, figs and asparagus were said to be on the menu.
‘Sadly, for Aphrodite she is not around to see the culinary modern-day desire that started on the high street in Gosforth Northumberland.
‘Greggs over the years has evolved from a bakery to food on the go, this has meant an expanding share price and perhaps an expanding waistline for overindulgent customers.
‘A quiet night in on the 14th can be helped by their move into home delivery but if you were lucky a few years ago, Greggs offered a sit-down candle lit dinner in five of its stores for £15 per couple.
‘With no debt, cash in the bank and an increasing number of stores, this stock is starting to look more like an Adonis!’
4. AG Barr
Irn-Bru maker AG Barr shares have lost around 3 per cent over the past year, bringing five-year losses to almost 30 per cent.
But the shares have rallied strongly from their July 2023 with investors encouraged by AG Barr’s acquisition-led performance improvement.
Scott says: ‘In 2018 scientists at the University of Edinburgh carried out a study to shed light on how redheads inherit their distinctive locks.
‘It had been thought that red hair is controlled by a single gene called MC1R, however research showed that other unknown genes had to be involved.
‘For many in Scotland this just backed up the well-known theory. Too much Irn-Bru consumption through the generations.
‘Fear not if you don’t like the rusty fizzy stuff, the company moved into the cocktail market as far back has 2015 with their Funkin acquisition.
‘A focus on energy drinks has also provided a boost. You could impress your partner by becoming a mixologist for the evening by creating your very own Scottish Aperol Spritz.
‘AG Barr is well positioned to grow revenues and improve margins, has net cash on the balance sheet and its very own tartan.’
5. Whitbread
Premier Inn owner Whitbread shares are up by around 14.5 per cent over the last year to £34.78, thanks largely to an early January bounce on the back of better-than-expected accommodation demand.
Scott says: ‘I was once asked at the start of my career, which company owned the largest number of hotels in the UK in 1993?
‘Clearly, I was destined to get the answer wrong, it taught me and the lenders a lesson on leverage and speculative development.
‘Years later; restricted access to capital, an independent sector in long-term decline, a market seeing structural growth – simply put supply demand dynamics are favourable.
‘Premier Inn owned by Whitbread sees long term opportunity to help support the leisure and business customers, oh and that romantic night away. With 37 per cent of rooms booked for £80 or less it does not cost the earth.
‘You can even flex that budget and upgrade to Premier Plus for £20 or so to impress the love of your life.
The largest owner of hotels in 1993 was supposedly one Royal Bank of Scotland, they weren’t in the hotel business but were in the business of collecting back the keys.’
6. On the Beach
On the Beach shares were handed a blow last month when the holiday group announced that founder Simon Cooper will step down as chief executive within the year.
Cooper, 50 played a pivotal role in growing On the Beach into one of the UK’s leading online beach holiday retailers, but the group has struggled to return to pre-Covid performance.
Scott says: ‘Chris Rea a few weeks ago had you ‘Driving home for Christmas’, he now seems to be singing ‘On the beach’ to get you excited about the summer.
‘This song spent 9 months in the New Zealand charts, where they have a 55-mile-long beach called 90-mile beach.
‘It must have been named by a bullish fund manager.
‘Why not whisk the one you love off on a short warm break to beat the winter blues and show off to the checkout person in Tesco when you ask them where the suntan lotion is?
‘On the Beach was founded in 2004 and has gone from strength to strength. Described in a recent note by Panmure Gordon as ‘unloved and undervalued’ this is not what we want to hear on Valentine’s Day.
‘Strong booking trends and margin upside should herald a different headline. If you are fed up with Benidorm it is good to know that they have expanded their range into long-haul.’
7. Chrysalis Investments
Chrysalis launched with fanfare in 2018 with a portfolio of unquoted companies looking to grow and go public. But A post-pandemic slump in the value of growth stocks of this kind, leaving Chrysalis shares looking unloved.
The investment trust, which is currently sitting on a discount to net asset value of almost 40 per cent, last week kickstarted legal proceedings against former portfolio holding, the beleaguered cosmetics firm Revolution Beauty
Darius McDermott, managing director at Chelsea Financial Services, says:
Chrysalis Investments was launched in 2018 by Richard Watts and Nick Williamson, recognising the need for a vehicle to finance high-growth pre-IPO companies. CHRY offers capital to fuel these “challengers” before their public launch.
‘Recent market volatility hit early-stage growth valuations hard, and CHRY’s discount plummeted to over 60 per cent at the depths of the selloff. While the discount has since narrowed to 40 per cent as portfolio companies matured, we believe this valuation remains at odds with reality.
‘Several holdings are expected to IPO in the coming years. Names like Starling Bank, Klarna, and WeFox represent significant allocations in the portfolio, and if any one of these businesses list at a premium it could trigger a noticeable uplift in the trust’s share price. We hold CHRY in the VT Chelsea multi asset portfolios.
8. Knights Group
Long-time unloved, but quickly finding new admirers, Knights Group has rallied by around 70 per cent over the last 12 months but its shares remain at less than half their value five years ago.
Knights Group shares nosedived in March of 2022 after the legal services group warned difficulty in getting workers back to the office was hitting business.
Hywel Franklin, head of European equities at Mirabaud Asset Management, says:
‘Knights Group is a well-established UK legal services provider, has had the full UK small cap experience from top to bottom. Despite its strong regional presence enabling it to offer legal services at an attractive value, undercutting competition and winning market share, it trades on 6x earnings – well below its historic average of 15x.
‘Recent results have showcased its resilience, and we believe that demonstrating robust organic growth holds the key to unlocking significant value. If successful, it could propel them towards valuations more reflective of industry peers.’
