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2 cheap shares I’d buy following Pfizer’s vaccine breakthrough

Noah Riley
·3-min read
Coronavirus 2019-nCoV Blood Samples Medical Concept
Coronavirus 2019-nCoV Blood Samples Medical Concept

The market soared in Monday afternoon trading as Pfizer announced results from its Covid-19 vaccine trial. These proved to be extremely promising and offer a route to re-opening the world economy. This is particularly positive for the UK, where the country has just entered lockdown for the second time – the vaccine announcement has injected optimism around future trading for many shares. Even after the 5% Footsie surge on Monday, I still believe the market has further to go to price in fully the significance of the new vaccine. The UK market is full of promising cheap shares at present, many of whom I believe are seriously undervalued.

Hollywood Bowl offers plenty of potential

The first cheap share I’m interested in buying more of is Hollywood Bowl (LSE:BOWL). I believe there is much appeal to Hollywood Bowl at current levels as the leading bowling alley operator in the UK. The company is desperate for some way out of this pandemic and the new vaccine may have just provided that.

Even after the recent c.45% surge in share price, shares still stand down around 35% since late February. Prior to the pandemic, Hollywood Bowl was performing very well and delivered increasingly strong financial results. Full year 2019 revenues had increased 7.8% year-on-year and profit before tax was up 15% to £27 million. The company had even taken action to trim its already low debt by 15% to £2.1 million.

It was no surprise, then, to see that Hollywood Bowl’s share price was hitting all-time highs before Covid gripped the market. I believe there is still a strong market position for the company in the post-Covid world, where consumers will be seeking post-lockdown entertainment. With a historic P/E of just 10, I believe Hollywood Bowl is an attractive cheap share for the post-vaccine world, and am pleased to see that my Foolish colleague Roland Head agrees.

Why Everyman looks like a cheap share

The other share on my list is the niche cinema chain Everyman Media Group (LSE:EMAN). Everyman has a fascinating business model with a fresh, revolutionary offering. The cinema chain places a focus on quality of experience in each of its venues and therefore charges a higher price for tickets. Everyman wants to curate this experience for cinema-goers through a greater emphasis on comfort and quality of food and drink to attract a higher spending up-market clientele.

Like Hollywood Bowl, Everyman was performing well before the pandemic, steadily growing both its top and bottom line with a programme of new cinema roll-outs. Due to the pandemic, the cinema industry was one of the hardest hit – but this has put Everyman at a favourable valuation currently. Even through the pandemic, I favoured Everyman as it has fewer cinemas and is therefore far more versatile than peers such as Cineworld that have higher fixed costs.

Unlike Cineworld, Everyman only closed its cinemas when forced to do so by government guidelines. The new vaccine promise has given Everyman shares relief, surging around 35% from their recent lows. However, even after this rise, I believe Everyman is a cheap share at current levels. Whilst the P/E is higher than Hollywood Bowl’s, this a high-growth, exciting, niche-focused firm. I believe Everyman’s historic P/E of less than 40 is cheap, particularly with the strong vaccine potential.

The post 2 cheap shares I’d buy following Pfizer’s vaccine breakthrough appeared first on The Motley Fool UK.

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Noah Riley owns shares in Hollywood Bowl and Everyman Media Group. The Motley Fool UK has recommended Hollywood Bowl. 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