Stock market

The best British stocks to consider buying in May

Every month, we ask our freelance writers to share their top ideas for buying stocks with investors—what they said for May!

[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

British American Tobacco

What it does: British American Tobacco is a tobacco manufacturer that markets its products under brands worldwide. lucky Strike

By Christopher Rowan. gave British American Tobacco (LSE: BATS) share price has still not recovered from the company’s massive non-cash write-down last year of the long-term value of key brands.

Recently, the share has been trading within 5% of its 5-year low. Weak prices and rising profits mean that FTSE 100 The company now offers a dividend yield of around 10%.

Are there risks that help explain this price and high yield? Indeed. Cigarette sales are in long-term decline, the company is heavily indebted and regulatory pressures are adding uncertainty to the outlook for non-cigarette product formats.

But the business is a stable owner of well-established premium brands and has significant pricing power. It still has strong sales despite declining cigarette volumes and has been growing its non-cigarette business rapidly in recent years.

The balance of risk and reward here seems favorable to me.

Christopher Rowe owns shares. British American Tobacco.

Coca-Cola HBC

What it does: Coca-Cola HBC makes some of the world’s favorite soft drinks. Coke, Fanta. And Sprite.

By Ben McPoland. I really like the look. Coca-Cola HBC (LSE: CCH) stock now. The Footsy firm bottles and sells beverages. The Coca-Cola Company and other beverage firms in 29 countries. They span emerging, developing and established markets from Italy and Poland to Nigeria and Egypt.

Net sales revenue rose 10.7% to €10.2bn last year, the company’s third consecutive year of double-digit growth. Earnings per share rose 21.8% to €2.08 while the dividend was increased by 19%. It currently has a yield of 3.3%.

As I write, the forward P/E ratio is only 13. It looks like a bargain to me given the firm’s significant presence in emerging markets, where rising incomes and increasing urbanization trends are driving consumer demand for branded beverages.

A major economic downturn is a threat here as it may reduce the demand for soft drinks. But it looks like a stable long-term compounder trading at an attractive price. I may well invest in the coming weeks.

Ben McPoland does not own shares in Coca-Cola HBC..

ITV

What it does: ITV is the largest commercial broadcaster in the UK. In recent years, it has started offering streaming and content creation services.

By Charlie Keefe. I really like the look. ITV (LSE: ITV) May shares. At 70.4p (as at 25 April), I see the stock as excellent value for money.

That’s why I recently snapped up some shares. And with any extra cash, I’ll do the same in May.

The company has underperformed in recent times. The traditional TV advertising market has been flagged. Rising inflation has caused ITV subscribers to cut costs.

But trading at nine times forward earnings, I feel an opportunity. For some investors, ITV may look like a value trap. But I would argue otherwise.

It has made solid progress with its digital transformation and is on track to deliver at least £750m of digital revenue by 2026. Last year it posted revenues of £490m.

At the same time, it is cutting costs. So far, it has saved £130m a year and is on track to hit its £150m target by 2025, a year early.

It also has a juicy 7.1% dividend yield. It’s up there with one of the highest on footsie.

Charlie Keefe owns shares in ITV.

Kingfisher

What it does: Kingfisher owns the B&Q and Screwfix businesses in the UK and similar home improvement retailers in France and Poland.

By Roland Head. After a boom during the pandemic, demand for home improvements has slowed over the past 18 months.

Kingfisher (LSE: KGF) is facing particular pressure in France, where its Castorama business has underperformed. However, the group’s UK operations are still trading relatively well and have gained market share in the past year.

Steps are underway to address the issues in France. Meanwhile, Kingfisher is cash-generating and has minimal debt.

After the company’s recent results, broker forecasts value the shares at around 12 times 24/25 earnings, with a yield of just under 5%. The latest guidance from management suggests to me that profitability should remain well supported by free cash flow.

Home improvement sales are tied to housing market conditions, so there’s a risk that things could get worse before they get better.

However, I think Kingfisher shares are already priced in for bad news. In my view, the stock is well positioned for a recovery.

Rowland Head does not own shares in Kingfisher.

QinetiQ Group

What it does: The QinetiQ Group provides defense and security products and services, mainly to the UK, US and Australia.

By Royston Wilde. Defense giant QinetiQ Group(LSE:QQ.)’s share price fell in April following the release of disappointing financials. I think this represents an attractive buying opportunity.

Investors have been spooked by the recent easing. FTSE 250 The firm’s global solutions division. Yet I think this may be an overreaction, given that, by and large, FTSE 250 firms have been performing very strongly. QinetiQ’s book-to-bill ratio stood at 1.1 times during the March quarter, reflecting strong demand for its technologies.

City analysts expect revenue to grow by 11% over the next two fiscal years. This means that, after this recent price weakness, QinetiQ trades at a forward price-to-earnings (P/E) ratio of just 11.1 times.

This makes the company much cheaper on paper than many of the UK’s best-known defense stocks. FTSE 100’s BAE Systems And Rolls RoyceFor example, trade at earnings multiples of 19.1 times and 26.7 times, respectively.

I think QinetiQ could be a great way for investors to play the booming defense industry.

Royston Wild does not own shares in any of the shares mentioned.


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