Selling Suddenly Sputters in Ladbrokes, Hills

Heavy selling in William Hill and Ladbrokes ground to a halt this week as both companies regained a vestige of their previous form -- the latter on rumored stake building by the Irish investment trio of Dermot Desmond, J.P. McManus and John Magnier.

On Friday, Hills was up 7 percent to 326 pence, a price last achieved on June 30, 2008; Ladbrokes, too, was up 5.38 percent to 279.25 pence, a level last seen on June 26.

"There is very good reason for the positive share price movement and the shares of both stocks, in our opinion, have been far too heavily sold," James Hollins, an analyst with Daniel Stewart & Co. in London, wrote in research note.

"While an economic and consumer downturn is clearly unhelpful for the leisure sector and discretionary spend," the note continued, "we continue to believe that gambling (offline and online) will be relatively resilient given the habitual, low-spend, entertainment-led nature of the spend."

Regarding the stake building in Ladbrokes, Mr. McManus and Mr. Magnier, the racing magnates, are thought to maintain a holding of just below 3 percent.

The two are known to be close with several other Ladbrokes investors, including Joe Lewis, the Bahamas-based British billionaire who in February took a 7 percent stake in the bookmaker.

Mr. Desmond's story with Ladbrokes, meanwhile, is quite colorful.

In January 2007, he was linked to a deal with the London-listed company, while a year earlier, Ladbrokes denied it was in discussions to acquire parts of Mr. Desmond's betting exchange, Betdaq.

This week has been kind to two-medium gambling companies, which in recent months have taken a hammering. Rank Group -- which Mr. Lewis is also rumored to have interest in -- was up 18.3 percent; William Hill, 24.4 percent; Ladbrokes, 21.9 percent; and Paddy Power, 2.5 percent.

Mr. Hollins has "buy" recommendations on William Hill and Ladbrokes.