UK Markets close in 12 mins
  • FTSE 100

    -30.95 (-0.48%)
  • FTSE 250

    -162.78 (-0.83%)
  • AIM

    +5.20 (+0.50%)

    -0.0032 (-0.29%)

    -0.0052 (-0.3892%)

    -740.56 (-5.51%)
  • CMC Crypto 200

    -40.01 (-10.80%)
  • S&P 500

    -5.76 (-0.16%)
  • DOW

    -173.77 (-0.58%)

    -0.78 (-1.71%)

    +2.30 (+0.13%)
  • NIKKEI 225

    +240.45 (+0.91%)

    +149.70 (+0.56%)
  • DAX

    +15.07 (+0.11%)
  • CAC 40

    -2.29 (-0.04%)

£1K to invest? Here’s a stock you should seriously consider

Jabran Khan
·3-min read
A stock price graph showing growth over time, possibly in FTSE 100
A stock price graph showing growth over time, possibly in FTSE 100

One stock I like the look of is Go-Ahead Group (LSE:GOG). GOG is an international transport group and one of the UK’s leading public transport providers. It operates bus and rail services across the UK, Ireland, and Singapore and operates rail contracts in Germany and Norway. It is the largest operator of bus services in the UK and is also responsible for over 30% of all train passenger journeys in the UK.

Too risky or a Foolish buy?

A stock like GOG could be seen as a contrarian buy right now. This is because the travel and tourism sector has been massively affected by Covid-19. Government lockdowns across this and many other countries have impacted customer numbers on bus, rail, and air travel services.

I believe that essential journeys on bus and rail services to get to work and school will continue to rise. In addition to that, non-drivers will still need modes of transport to travel. Air travel will still be affected as I see international travel for holidays as a luxury trip at the moment. The government is wary of stimulating the economy and attempting to get the public out and about once more and ultimately this will benefit GOG and other essential transport providers out there.

In addition to this, a Rail Safety and Standards Board study conducted recently found there was less than a 0.01% risk of infection from an hour-long journey in a train carriage. This was even without passengers wearing face coverings.

Recent performance

When the market first crashed, GOG lost nearly 80% of its share price value. Between mid-February and its lowest point a month later, share prices fell from 2,210p per share to a lowly 473p. As I write this, shares can be picked up at just under 590p per share, which is a bargain in my opinion.

At the end of September, GOG released its full-year results. As expected the pandemic had affected its business. That being said, it seems the regional bus arm of the business was mostly affected whereas its rail operations remained resilient which is pleasing to see from an investment perspective.

Overall group revenue increased by close to 6%. In the UK regional bus market, revenue was down to £408.8m compared to the previous year of £433m. GOG’s London and International Bus services and Rail business were up 6% and 8% respectively. GOG did turn over a profit of £77m; however, this was down compared to the £121m in 2019. Net cash increased a huge 376% compared to the previous year, which shows the business has good liquidity.

A stock you should buy for the long term

I think GOG presents a good opportunity as a long-term stock at a bargain price of nearly 590p per share. At the time of writing, 90% of Go Ahead Group’s business is operating under contracts that did not rely on passenger revenues to be profitable.

I feel the international reach of the business will continue to keep GOG profitable. It has shown good resilience in the face of unprecedented market conditions. It has a good level of liquidity to fight off any further travel restrictions in my opinion too. I would seriously consider this stock for a long-term buy and hold strategy. I envisage rail and bus travel to continue to rise over time and normalise somewhat.

The post £1K to invest? Here’s a stock you should seriously consider appeared first on The Motley Fool UK.

More reading

Jabran Khan has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2020