Sunday share tips: Literacy Capital, Team 17

(Sharecast News) - The Financial Mail on Sunday's Midas column told readers to 'buy' shares of Literacy Capital, arguing that they should gain ground, "despite the choppy economic climate".

The philanthropic investment firm invests for the long-term and donates 0.9% of the value of its assets each year to literacy charities.

It was co-founded by Paul Pindar, who co-founded consultancy Capita in 2017, turning it from a £330,000 venture into a £8.5bn FTSE-100 listed outfit by the time of his retirement.

Its portfolio includes 18 companies which have been deemed to have genuine, long-term potential through economic cycles.

The two largest investments are Grayce and RCI. The first trains and employs graduates in IT and associated fields whilst the second works with the police and NHS, providing specialist support to crime and assault victims.

Literacy Capital's results have been "impressive", the tipster said with an update on its portfolio's performance due over the next week.

"Reassuringly, too, Paul and Sharon Pindar own 28% of the business, [their son and co-founder] Richard has a 10.7% stake and several members of the team recently bought shares.

"Literacy Capital offers shareholders a chance to invest in a business that is growing fast and doing good. At £3.89, the shares are a buy, with the Pindars aiming to triple the firm's size firm to £1 billion. Bookmark is also seeking volunteers, offering a different kind of reward."

The Sunday Times's Lucy Tobin tipped Team 17 to her readers, pointing to the company's recent fast growth and the multiple positives around the indie video game developer.

Yes, the end of lockdowns was likely a factor behind the recent decline in the company's share price, but so too was the reduction in the number of games set for release from 12 to eight.

It was also facing a congested release window and plenty of competition, she conceded.

But gaming firms might yet benefit from the cost of living crisis - as gaming remained a cheap night in.

Furthermore, games analyst Newzoo was forecasting compound annual growth for the global gaming industry of nine per cent over 2019-24.

And while profits for the latest half had shrunk by £3m to £11m, that was mostly the result of higher costs linked to acquisitions, Tobin explained.

Sales on the other hand had jumped by a third to a record £53m, despite just one new game having been launched during the period.

Furthermore, acquisition had boosted the share of revenues derived from the company's own intellectual property to 38%.

She also cited analysts at Berenberg, who had recently highlighted Team 7s "very positive pipeline, while labelling the shares, which were changing hands on just 16 times' earnings for 2023, as "highly attractive".

"The purple-haired Bestwick looks to be steering towards another purple patch at Team17. Buy."