Serco (SRP): A Play On Big Government

It has been the case in recent years that outsourcers like Serco should have been avoided like the plague, with Capita being the particular disaster in this respect. However, it may be that Serco, with its 50,000 employees covering sectors from defence to immigration is so integrated into the State that it is too big to fail. Indeed, it may have a license to print money.

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True, under a Marxist Labour Government one might argue that that the services that Serco provides should be nationalised, but of course, it is likely that the Deep State will prevent such a nightmare scenario. It has, of course, done well in this respect so far.

Not surprisingly, this company which is so intertwined with Government would not be expected to be run by just any old person. We have Rupert Soames, grandson of Sir Winston Churchill as CEO. So this really is an Establishment outpost.

Even better, after five years of decline the group has been able to boast a 20 percent rise in interim profits, a forecast of double digit growth, and so far spurned offers for Babcock.

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While all of this witnesses shares of Serco at the top of the post 2015 range near 150p, the company could have enough momentum behind it to push back up to 4 year resistance at 180p. The stop loss on such an idea would be 50 day moving average at 129p. Nevertheless, it does appear that there is enough momentum behind the stock to deliver a breakout, with or without Babcock.

Author: Zak Mir

Financial commentator, interviewer, technical analyst

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