Sunday share tips: Barratt Developments, Codemasters

The Telegraph's Robert Stephens said on Sunday that Boris Johnson's election victory had given housebuilder Barratt Developments "reason to cheer" by virtue of eliminating the risk of Labour's "Land for the Many" housing market ideas being implemented.

In his Questor share tips column, Stephens said a Conservative majority meant that Barratt could instead look forward to the continuation of long-standing government policies that had pushed first-time buyers toward its newbuild properties.

"Now, policies such as Help to Buy and stamp duty relief are likely to remain in place, or even be extended, as Mr Johnson's government seeks to make housing more affordable for first-time buyers," said Stephens.

Stephens noted that housing affordability should be further supported by continued low interest rates and added that ongoing Brexit uncertainty and a modest rate of inflation could make the Bank of England increasingly reluctant to tighten monetary policy.

"Low interest rates have undoubtedly aided housebuilders such as Barratt in recent years. For example, loose monetary policy since the financial crisis has contributed to a fall in the proportion of disposable income that homeowners spend on their mortgage repayments," he said.

Questor, which stood by its 'buy' rating on the firm, thinks demand for newbuild homes should continue to be robust, which should vindicate Barratt's plan to increase the number of homes that it builds.

Stephens highlighted that investors' fears over political uncertainty had also contributed to "a depressed price-to-earnings ratio", currently 10.3, but he reckons that the share price should start to recover as the threat of a socialist government, with its "radical plans for the housing industry", has now dissipated.

"Barratt’s stock market valuation may now begin to more accurately reflect the attractive operating conditions it enjoys and the business could deliver improving long-term returns for investors," he concluded.

Over at This is Money, Joanne Hart singled out video games developer Codemasters as one of three key stocks to watch in 2020.

Hart, in her Midas Share Tips column, noted that over the past 40 years, video gaming had become a £90bn industry, with sales rising by around 9% annually.

"Codemasters is a relative minnow in the sector but it is growing faster than the rest of the market and chief executive Frank Sagnier believes that the group can double in size over the next five years," said Hart.

She noted that the shares have had a good run in recent months but, at £2.78, Hart noted that they were "still undervalued compared to rivals" and should continue to gain ground this year and beyond.

Around 60% of Codemasters' revenues come from digital games and this is expected to rise to close to 90% over the next few years.

"Sagnier has also signed a deal with one of China's biggest gaming groups, NetEase, which should prove hugely rewarding. And Grid is one of the first games on a new streaming service from Google, Stadia, a little like Netflix for gamers," Hart added.

Midas declared the "fast-growing business in a resilient industry" a 'buy'.