Broker Morgan Stanley has become a buyer of Argos-owner Home Retail for the first time since the business was founded through demerger from GUS in 2006.

Morgan Stanley analyst Geoff Ruddell said the shift in stance party reflected Home Retail’s “compelling” valuation but also that Argos’s problems look cyclical rather than structural and the group is well financed, with a cash pile of more than £300m.

“We cannot recall profitable, cash-generative, financially secure retail businesses ever trading on such a low valuation,” Ruddell noted.

He said: “While Argos is clearly vulnerable to the supermarkets’ non-food expansion plans, and to the growth of Amazon, we think its main problem over the last three years has simply been that it is trying to sell high-ticket items to low-income consumers.”