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Sunday share tips: Mulberry, Codemasters

Sun 27 December 2020 19:19 | A A A

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(Sharecast News) - The Sunday Times's Sam Chambers recommended readers "avoid" shares of Mulberry, arguing that Mike Ashley was unlikely to try and buy out the luxury retailer's main shareholders and the lack of liquidity in the stock limiting the upside in its share price.

Ashley, the boss of Sports Direct, had taken a 36.8% stake in Mulberry to lock in the firm as a supplier of his Frasers Group, not as a prelude to buying its owners, Christina Ong and her husband, who hold a combined 56.1% of the company's shares.

So while Ashley believes Mulberry is undervalued and even if there is an improvement in its fortunes, "there is insufficient liquidity in its shares to lift them significantly higher," Chambers said.

Indeed, given the above, the tipster mused out loud whether the company even benefits from a public listing.

"Yet with Ashley unlikely to stump up enough cash to convince Ong to sell, shareholders are stuck between a rock and a hard place."

The tipster also pointed out the expected hit to British luxury brands from the ending of VAT-free shopping for non-European Union tourists and the stiff competition it faced in Asia from luxury giants LVMH and Chanel.

"Avoid."

The Mail on Sunday's Midas column thought it was high time to book profits in Codemasters and sell.

A cash and shares takeover offer from US rival Take Two Interactive in November valuing at Codemasters at 485p had been quickly followed by another in early December - but this time all in cash - from California's Electronic Arts for 604p.

The latter in particular had seen shares of the videogame software manufacturer soar.

And with the share price holding above the level offered by Electronic Arts, it was clear that investors believed that an even higher bid might soon follow.

That was all on top of a blistering run in the stock over the course of 2020 as Covid-19 mobility restrictions drove people towards electronic gaming with literally billions having been forced to stay at home.

Even so, at the current juncture there was no certainty that higher bids would materialise, so Midas's recommendation to its readers was to sell.

"All but the most adventurous should quit while they are ahead and sell," the tipster said.

"Even those determined to see this battle through to the end should sell at least half their stock now."

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