Frustrated commuters may have voiced their views on travel company First Group in recent months but it is being tipped as one of the better recovery plays for investors.

The group whose UK rail interests include the First Great Western, Trans Pennine Express and Hull Trains is one of Britain’s largest transport companies and can boast a clutch of bus services and freight rail services along side its passenger franchises.

Earlier in the year its share price suffered as severe weather conditions in the UK and the US (it has a yellow school bus service there) battered its operating profits to the tune of £16 billion.

Added to this were fears that its North American school bus business was feeling the effects of cuts in public spending budgets.

However, many investors have overlooked the potential gains.

First Group’s franchises were secured before the recession and, therefore, qualify for revenue support so the effect from any reduction in passenger numbers is likely to be offset.

Furthermore, growing speculation of merger and acquisition activity in the sector has led many analysts to turn the spotlight on First Group as a potential target.

Nick Raynor, investment analyst at The Share Centre, says the company’s yield is still attractive; an interim dividend of 6.65p will be paid with an increase of 10 per cent.

He added, ‘The market has been growing increasingly nervous about the prospects for the sector into 2010, as the recession hits passenger numbers and possibly ticket prices.

‘This is an investment idea for investors who believe that we are through the worst and are looking for a recovery play.’

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