Three stocks highlighted by our recent AlpaScreen have all exhibited steep share price performance year-to-date, each now standing materially above pre-covid levels, all helped by strong underlying market dynamics and/or positive upgrade cycles through the past 12 months. In all three cases, valuations looked to have over-extended allowing the positives to be overly dominant, potentially ignoring risk and matters that still need to be worked through or proven. Thus, the strong outperformance for NCC, St James Place and Mortgage Advice Bureau could struggle to continue.
Ever onwards and upwards?
- NCC Group (NCC). An ever more connected world needs both confidence of access to mission critical software and an assurance that connected systems are safe and secure, needs which will only increase. These needs fully describe NCC’s market proposition. Following a transformative acquisition, NCC has the scope to deliver sustained growth if the marriage value can be unlocked. There could be good value here, but many ifs and buts need to be worked out, especially the more tangential benefits from the Iron Mountain acquisition and whether there will be a short-term dent from high wage inflation. At 26x PE, risk looks underpriced.