Narrowing down the right stocks to buy based on multiple metrics is almost impossible without a solid methodology – which is where InvestingPro comes in.
So what are the best UK stocks to buy now or add to your watchlist? Brunner Investment Trust (BUT), Morgan Sindall Group PLC (MGNS), GSK PLC (GSK), Associated British Foods (ABF) and 3I Group PLC (III) have been suggested this month by our InvestingPro AI/Analyst hybrid.
June came and went in a flurry of geopolitical half-surprises, but the stock markets still seem to be cautiously optimistic as we move into July. The previous few months’ market successes still linger in the air and projections of an overall bullish trend persist, painting a favourable backdrop for investors seeking to position themselves strategically as we move into H2, 2024: finding opportunities in robust companies whose shares are still undervalued.
Our Stock-Picking Methodology
These 5 stocks are our top Pro Picks for this month, taken from FTSE 250-listed companies that have garnered high InvestingPro health ratings (benchmarked against more than 100 financial factors and indicators from companies in the same sector), as well as from among those trading well under our proprietary fair value estimates (based on 5 overlaid investing models) and analyst assessments.
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The term “undervalued stocks” refers to stocks that are trading at a price below their intrinsic value or growth potential. Investors often look for undervalued stocks because, over the long term, the market will likely recognise the company’s true value, leading to a rise in the stock price and providing profit opportunities.
All of these names have earned InvestingPro health scores of well above 3.00, which for the last 7 years has indicated outperformance vs. the FTSE 250. A score this high points to a mix of first-rate financials: excellent earnings, cash flow, and growth vs. peers in its sector.
5 UK Stocks To Consider In July 2024
Top July Stock | InvestingPro Health Score |
---|---|
Brunner Investment Trust (BUT) | 3.10 / 5 |
Morgan Sindall Group PLC (MGNS) | 3.19 / 5 |
GSK PLC (GSK) | 3.17 / 5 |
Associated British Foods (ABF) | 3.16 / 5 |
3I Group PLC (III) | 3.52 / 5 |
Importantly, all of these stocks are also currently undervalued per InvestingPro’s fair value calculations and favoured by Wall Street analysts polled by InvestingPro. They’re also sitting with a current potential upside of more than 20%. So if you’re eager to bulk up your portfolio, these overlooked powerhouse plays are all worth serious consideration.
Brunner Investment Trust (BUT):
- InvestingPro health score: 3.10 / 5.00
- InvestingPro average fair value: £17.50 / 31.6% upside
- Fair value confidence: Medium
- Industry: Financials / Capital Markets
Brunner Investment Trust (BUT) offers a compelling opportunity for investors seeking a balanced approach to income and capital growth. As of June 27, 2024, BUT has a market capitalisation of approximately £557 million. The trust has consistently outperformed its benchmarks, boasting double-digit annual NAV total returns over the last decade.
The trust’s current P/E ratio stands at 13.7, reflecting a moderate valuation relative to its earnings. Its dividend yield is 1.8%, with a strong track record of dividend growth, having increased its annual dividend for 8 consecutive years. This makes it a reliable choice for income-focused investors.
BUT’s portfolio is well-diversified with significant holdings in industrials and financials, sectors that are expected to perform well in an economic recovery. The trust’s strategy emphasises investing in high-quality companies with stable, above-average returns, and its long-term focus results in a low portfolio turnover of less than 20% per year.
Despite its strengths, BUT trades at 31.5% below fair value, presenting a potential upside for investors. This discount, combined with its solid performance history and robust dividend growth, makes BUT an attractive option for those looking to add a reliable global equity fund to their portfolio.
Morgan Sindall Group PLC (MGNS):
- InvestingPro health score: 3.19 / 5.00
- InvestingPro average fair value: £32.58 / 27.8% upside
- Fair value confidence: High
- Industry: Industrials / Construction & Engineering
Morgan Sindall Group PLC (MGNS) is a UK-based construction and regeneration company with a solid market capitalisation of approximately £1.18 billion. For the first quarter of 2024, the company reported revenues of £1.09 billion, showcasing significant growth from the previous year. With a competitive price-to-earnings (P/E) ratio of 10.1, Morgan Sindall is relatively undervalued compared to industry peers.
Investors will find Morgan Sindall’s financial health robust, evidenced by a manageable debt-to-equity ratio of 25.42%. While the company’s net profit margin stands at a lower-side 2.86%, it boasts a strong return on equity (ROE) of 22.12%, indicating efficient management of shareholder funds to generate profits .
For income-focused investors, the dividend yield is an attractive 4.6%, supported by a consistent history of payments, providing a reliable income stream. Volatility is moderate, with a beta of 1.23, suggesting the stock is slightly more volatile than the market but not excessively risky.
Overall, Morgan Sindall’s balanced financials, growth potential, and attractive dividend yield make it a compelling choice for investors seeking both stability and upside in the construction sector.
GSK PLC (GSK):
- InvestingPro health score: 3.17 / 5.00
- InvestingPro average fair value: £23.71 / 56.8% upside
- Fair value confidence: High
- Industry: Healthcare / Pharmaceuticals
GlaxoSmithKline PLC (GSK) stands out as a strong investment opportunity in the pharmaceutical sector, particularly given its robust market presence and promising pipeline. As of June 2024, GSK has a market capitalisation of approximately £65.22 billion. The company has demonstrated consistent growth, with a 5% year-over-year increase in its latest quarterly report, largely driven by its vaccine division and products like Shingrix.
GSK maintains a competitive price-to-earnings (P/E) ratio of 14.8, indicating it is reasonably valued compared to its peers. Additionally, the company offers a solid dividend yield of around 3.7%, making it an attractive option for income-focused investors. Its strong financial health is further underscored by manageable debt levels and a strategic focus on long-term growth areas such as long-acting HIV injectables and vaccines.
Investors should consider the potential volatility associated with the pharmaceutical sector, including risks from patent expirations. However, GSK’s strategic initiatives and robust pipeline offer significant upside potential, with analysts projecting up to a 56.8% increase in stock value. This combination of growth potential, reasonable valuation, and steady income makes GSK a compelling choice for investors looking for stability and upside in the healthcare sector.
Associated British Foods (ABF):
- InvestingPro health score: 3.16 / 5.00
- InvestingPro average fair value: £24.94 / 21.3% upside
- Fair value confidence: High
- Industry: Consumer Staples / Food Products
Associated British Foods (ABF) is an intriguing pick for July 2024, offering a diverse portfolio with a significant upside. ABF operates in five business segments: Grocery, Sugar, Agriculture, Ingredients, and Retail, with its flagship Primark chain being a substantial growth driver.
As of the end of June 2024, ABF’s market capitalisation stands at approximately £18.75 billion. ABF’s P/E ratio is currently around 15.9, indicative of its healthy earnings outlook. The company has announced a further £500 million share buyback and an increased dividend, resulting in a yield of about 2.1%.
Primark, accounting for nearly half of ABF’s revenue, continues to thrive with a 15% revenue growth to £9 billion, despite a slight dip in operating profit due to selective price increases aimed at sustaining customer footfall during high inflation periods. The brand’s expansion into the US market, with 27 new stores opened, further bolsters its growth potential.
Investors should note that while ABF has shown resilience and growth, the company does face volatility risks primarily from its sugar business and broader economic factors affecting retail and consumer spending. However, with easing inflationary pressures and strategic investments in digital and store expansions, ABF presents a promising opportunity for growth-oriented investors.
3I Group PLC (III):
- InvestingPro health score: 3.49 / 5.00
- InvestingPro average fair value: £39.23 / 30.3% upside
- Fair value confidence: High
- Industry: Financials / Capital Markets
3i Group PLC (LON: III) is an attractive investment opportunity for July 2024. This private equity and venture capital firm has demonstrated strong financial performance, boasting a market capitalisation of approximately £29.78 billion. As of the latest reports, 3i Group has a P/E ratio of 7.77, indicating it may be undervalued compared to its industry peers.
The company maintains a solid dividend yield of 1.97%, with the most recent ex-dividend date on June 20, 2024. This stable dividend payment is a testament to 3i Group’s reliable income stream and commitment to returning value to shareholders.
3i Group’s strong balance sheet is highlighted by its low debt levels, ensuring financial stability and flexibility for future investments. Analysts from RBC Capital have rated the stock as “outperform,” underscoring its growth potential, particularly driven by its successful investment in Action, a rapidly expanding discount retailer.
With a well-diversified portfolio and a strategic focus on long-term growth, 3i Group presents a compelling investment case. Overall, 3i Group’s financial metrics and strategic outlook make it a strong contender for investors seeking new opportunities in the UK market.
Find More Of The Best UK Stocks
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Previous Stock Picks for FTSE 250 Securities (2024)
If you’re looking for more great opportunities, here is a list of our top stock picks for previous months.
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The health scores and these stocks’ place on our opportunities list were correct at the time of original posting month. It’s important for investors to check any updated information, which can be done at the click of a button through InvestingPro.
Top June Stock | InvestingPro Health Score |
---|---|
Telecom Plus PLC (TEP) | 3.26 / 5 |
Morgan Sindall Group PLC (MGNS) | 3.30 / 5 |
GSK PLC (GSK) | 3.23 / 5 |
Computacenter PLC (CCC) | 3.28 / 5 |
3I Group PLC (III) | 3.49 / 5 |
Top January Stock | InvestingPro Health Score |
---|---|
3i Group (III) | 3.79 / 5 |
TBC Bank Group (TBCG) | 3.01 / 5 |
Morgan Sindall Group (MGNS) | 3.02 / 5 |
Computacenter (CCC) | 3.33 / 5 |
Rio Tinto (RIO) | 3.08 / 5 |
Remember 📌
Past performance does not guarantee future success, and trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Trading on margin increases the financial risks. Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.