Asset manager picks little-known tech stocks in Europe that could surge higher

Published Fri, Jan 15 20211:24 AM ESTUpdated Fri, Jan 15 20217:27 AM EST

LONDON — Several tech shares listed on London's stock exchange are "trading at a discount" and have plenty of room to rise, according to Will Walker-Arnott, senior investment manager at wealth management service Charles Stanley. Walker-Arnott told CNBC's "Squawk Box Europe" on Wednesday that 2021 could be the year that the U.K. market gets its mojo back. "We've got Brexit out of the way," he said. "That means that the currency is going to be much less volatile, which will entice international investors back into the market." There is "an increasing positivity around the U.K. market," Walker-Arnott said, and named a number of U.K. gaming and cybersecurity stocks that Charles Stanley particularly likes. "I note with interest that a Cambridge-based company, Frontier Developments, had some very interesting numbers out this morning," he said. "We also like Team17." In a trading update filed with the London Stock Exchange on Wednesday, Frontier Developments said trading for its financial year-to-date is ahead of the board's expectations, with revenue for the six months to the end of November set to be £37 million ($50 million), up 16% from £32 million in the previous year. Founded in 1994, Frontier Developments has made games like Jurrasic World Evolution; Planet Zoo; RollerCoaster Tycoon 3; and Disneyland Adventures. Its shares were trading at £33 on Thursday, up 7% since the start of the year. Based in Wakefield, Yorkshire, Team17 is behind games including Worms Rumble and Overcooked! All You Can Eat. Its shares were priced at £8.55 on Thursday and have rallied 8.5% so far this year. Global gaming revenues are expected to exceed $180 billion by 2021, up from just $137 billion in 2018, according to market researcher Newzoo . "People are obviously staying at home or playing games," said Walker-Arnott in reference to the ongoing coronavirus pandemic and lockdowns around the world. "That's one area and the U.K. offers some really interesting companies, which are trading at a discount to their international peers." In terms of cybersecurity, Walker-Arnott said Czech-based Avast is a "FTSE 100 company trading at a significant discount to its U.S. peers." He added: "It is the biggest provider of cybersecurity direct to consumers. They've got 400 million users." Avast also has "great margins" and it's "very cash generative," according to Walker-Arnott. Looking at the U.K. market more broadly, he highlighted that there were already signs of increasing IPO (initial public offering) activity, with the likes of online cards and gift company MoonPig and boot-maker Dr. Martens set to list on the stock market this year.

Walker-Arnott told CNBC's "Squawk Box Europe" on Wednesday that 2021 could be the year that the U.K. market gets its mojo back.

"We've got Brexit out of the way," he said. "That means that the currency is going to be much less volatile, which will entice international investors back into the market."

There is "an increasing positivity around the U.K. market," Walker-Arnott said, and named a number of U.K. gaming and cybersecurity stocks that Charles Stanley particularly likes.