We asked our freelance writers to share the top British stocks they’d buy in the month of August. Here’s what they chose:
Tom Rodgers: Gamma Communications In the last five years, the £1.5bn market cap Gamma Communications (LSE: GAMA) has gained over 400%. But this is no risky biotech nor speculative punt.
The cloud communications seller targets SMEs. A series of acquisitions has opened up new markets in Germany and Spain, while a half-year trading update in July confirmed its “very robust” balance sheet, with 93% of revenue recurring and billed monthly. It has no debt and £37.7m of net cash.
A P/E of 35 might put off bargain hunters but GAMA is growing its earnings nicely, so I’m happy to keep averaging up as the business grows.
Tom Rodgers owns shares in Gamma Communications.
Kirsteen Mackay: M&G I think the M&G (LSE:MNG) share price will continue its ascent in August, as income investors continue to seek out quality stocks with a good dividend yield.
The M&G share price has risen steadily since the March stock market crash, and offers an outstanding yield of 8.8%. The company looks to have solid financial stability and a determination to keep the dividend safe.
This FTSE 100 newcomer is also actively seeking out growth opportunities. It recently launched a hostile bid for UK Mortgages and is in the process of acquiring a wealth management platform for UK financial advisors. It has a price-to-earnings ratio of 4 and earnings per share are 43p.
Kirsteen does not own shares in M&G.
Rupert Hargreaves: Flutter Entertainment Despite the coronavirus crisis, Flutter Entertainment (LSE: FLTR) is set to report a near 52% increase in earnings per share this year.
A surge in customers playing its online casino games has helped the group offset the drop-off in sports gambling revenues in recent months.
Going forward, the company could benefit from its efforts to expand across America. This could eventually become a multi-billion-dollar gambling market, according to analysts. Flutter has been investing heavily in the US market over the past few years and these efforts should begin to pay off shortly.
As such, investors looking for a high growth FTSE 100 stock may do quite well buying into this company as its fledgling US business starts to gain traction.
Rupert Hargreaves does not own shares in Flutter Entertainment.
Matthew Dumigan: Avast My top British stock for August, cyber-security firm Avast (LSE: AVST) provides services for over 435m active users and has anti-virus software available across all major operating systems. Earnings have been growing at an impressive rate, and the company boasts a strong and liquid balance sheet.
With concerns about online privacy now at the forefront of society, I think Avast is well positioned to capitalise on surging demand in a world that’s becoming ever-more reliant on technology. Despite being up 19% on the year, I think the shares offer value at today’s price for those prepared to hold for the long term.
Matthew Dumigan does not own shares in Avast.
Anna Sokolidou: BP (LON:BP) 2020 has been really tough for oil. The coronavirus pandemic and the oil price war between Saudi Arabia and Russia had a horrible effect on many oil companies. BP (LSE:BP) was no exception. Its shares are trading at a big discount compared to where they used to be. But, in my view, this can be used to a patient investor’s advantage. The current economic crisis will be fatal for smaller oil producers. Larger ones, however, will get leaner and fitter. One of them is BP with its high credit rating. What’s more, a supply glut often leads to a supply crunch.
Anna Sokolidou does not own shares in BP.
Kevin Godbold: Diageo (LON:DGE) In early April, premium alcoholic drinks giant Diageo (LSE: DGE) released a trading update. The lockdowns were affecting on-sales from pubs, restaurants and other outlets. Earnings dipped, but City analysts have pencilled in a recovery for the current trading year to June 2021.
The company has a long record of generating steady cash flow and paying rising shareholder dividends. And shareholder payments have continued through the pandemic. The full-year results are due around 4 August. Meanwhile, the share price remains depressed as I write. I’d buy for August and beyond to lock in the anticipated dividend yield running just above 2.5%.
Kevin Godbold does not own shares in Diageo.
Tezcan Gecgil: Howden Joinery My top British stock for August is kitchens and joinery products maker Howden Joinery (LSE: HWDN). In late July, the group released its half year report when it reported a pre-tax loss of £14.2m compared with a profit of £78.1m a year ago. Revenue fell 28.7% to £465.0m.
On a more positive note, as the country started to open up for business, sales in the first four week period of the second half were up 2% year-on-year.
Year-to-date HWDN shares are down about 20%, hovering at 550p. Investor nervousness around a second wave of coronavirus could spark another sell-off globally, including in many FTSE shares. However, I remain optimistic regarding the strength of our domestic home improvement market, which could mean increased demand for kitchens and other related products. I’d buy the dips in UK’s largest kitchen supplier.
Tezcan Gecgil does not own shares in Howden Joinery.
Edward Sheldon: Reckitt Benckiser My top British stock for August is health and hygiene company Reckitt Benckiser (LSE: RB).
In the current environment, I see Reckitt Benckiser as the ideal stock to own. Not only does the FTSE 100 company have the potential for growth due to the increased focus on hygiene globally, but it also has ‘defensive’ attributes due to the fact it’s a highly resilient company.
Reckitt Benckiser is not the cheapest stock in the FTSE 100. But I wouldn’t let its premium valuation put you off. Analysts at Barclays (LON:BARC) recently raised their target price from 7,900p to 9,000p, which is well above the current share price.
Edward Sheldon owns shares in Reckitt Benckiser.
David Barnes: DS Smith I expect shares in specialist packaging company DS Smith (LSE: SMDS) to continue to come under pressure in the short term, as the economy struggles and paper prices weigh down the North American export business.
But look past this and the company has some great trends for growth to build upon. E-commerce sales are exploding, and most of its business is in consumer goods and groceries that are resilient to economic downturns.
So I say load up now while the share price is 30% off its peak. When the dividend is reinstated, I think DS Smith will be a great long-term income and growth share.
David Barnes owns shares in DS Smith.
Royston Wild: Serabi Gold As gold prices explode, I reckon buying top British stocks that dig the metal out of the ground in August is a great idea. There’s a variety of such equities for British investors to choose from and I reckon Serabi Gold (LSE:SRB) is a great choice for those seeking top value.
This AIM-quoted stock has soared almost 40% in value since the start of the year but still looks cheap on paper. At current prices, it commands a rock-bottom forward P/E ratio of 6.3 times. It’s a reading that’s low enough to likely encourage more waves of frenzied buying in the coming days and weeks.
Gold prices have just hit new record peaks and a soup of macroeconomic and geopolitical worries should keep driving them northwards. I reckon Serabi Gold’s a great way to exploit this sunny outlook.
Royston Wild does not own shares in Serabi Gold.
Andy Ross: Computacenter (LON:CCC) Shares in the IT reseller Computacenter (LSE: CCC) have benefited from a combination of homeworking and a more general rise in tech stocks in recent months.
That said, it is a business of substance, unlike some of the more blue-sky, unprofitable tech stocks out there. In July the company announced adjusted profit before tax in the first half turned out to be “substantially ahead” of the same period last year.
I expect the share price to keep doing well in August, even with many investors trying to get away after lockdown.
Andy Ross does not own shares in Computacenter
Manika Premsingh: Hikma Pharmaceuticals (LON:HIK) While other stocks are still recovering from the market crash a few months ago, the FTSE 100 stock Hikma Pharmaceuticals (LSE: HIK) is well past it. In July, its share price was 13.5% higher than even in January, which is the pre-coronavirus period.
Moreover, it’s still paying dividends. The yield is small, at 2.2%, but at a time when many companies have suspended dividends, continued passive income from the stock stands out.
HIK’s latest trading update at the end of April was upbeat too, with a positive outlook for 2020. I reckon that its share price will rally after it releases another financial update in August, making it my top British stock for August.
Manika Premsingh has no position in Hikma Pharmaceuticals.
Jonathan Smith: boohoo group The halving of the boohoo (LSE: BOO) share price in only a few trading days in July caused quite a stir. The slump was due to reports about poor working conditions and pay from a factory in Leicester where Boohoo buys goods from.
With the share price now around 250p, I think this is a great opportunity to buy a top British stock for August. The issue mentioned above is reputational more than financial. This leads me to believe that the firm can overcome this short-term bump in the road. After all, demand from consumers is still strong, which investors should see at the next trading update.
Jonathan Smith owns shares in boohoo group.
Paul Summers: boohoo group Shares in fast fashion firm boohoo (LSE: BOO) tumbled last month amid allegations of poor working conditions and pay in factories supplying wares to the company.
Although the ongoing independent review might rap a few knuckles, I think it likely that the AIM-listed star will be largely absolved of responsibility. Moreover, companies such as ASOS (LON:ASOS), JD Sports and Amazon (NASDAQ:AMZN) have all faced similar accusations in the past and they’re still going strong.
In the meantime, let’s not forget that this is a firm with stonking finances, a growing portfolio of brands and a social media presence most in the market would kill for. So long as it responds to any concerns quickly and appropriately, I think the medium-to-long term prospects for boohoo remain excellent.
Paul Summers owns shares in boohoo group
Roland Head: IG Group Holdings (LON:IGG) Online financial trading firm IG Group (LSE: IGG) has performed well in this year’s volatile market conditions. High levels of trading activity pushed the group’s pre-tax profits up by 52% to £296m for the year to 31 May.
Things are expected to calm down over the coming months, but I think there are good reasons to keep buying.
Firstly, IG’s share price has already pulled back to reflect lower profit expectations. If volatility stays high, I can easily see the firm upgrading its guidance.
Secondly, the group’s 40%+ operating margin and £832m cash pile mean that the 5.7% dividend yield looks safe to me in almost any scenario.
Roland Head owns shares of IG Group Holdings.
Peter Stephens: AstraZeneca AstraZeneca’s (LSE: AZN) recent results have shown a continued improvement in its financial performance. For example, its reported earnings per share increased by 33% in its most recent quarter, as new medicines and its pipeline continue to perform well.
Alongside an improving financial performance, the company’s defensive characteristics could make it increasingly attractive to investors while other companies struggle to post rising profitability due to a challenging economic outlook.
With AstraZeneca forecast to post double-digit net profit growth next year, its share price could continue to outperform its large-cap index peers after a strong first half of 2020. That’s why I’ve selected it as my top British stock for August.
Peter Stephens owns shares in AstraZeneca.
The post Top British stocks for August 2020 appeared first on The Motley Fool UK.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of Flutter Entertainment. The Motley Fool UK has recommended ASOS, boohoo group, Diageo, DS Smith, Hikma Pharmaceuticals, and Howden Joinery Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2020
First published on The Motley Fool