In troubled times like these, buying any stock can seem like a mega decision. It takes nerves to part with your money while screens are flashing red and markets are hurtling in every direction. But a mega decision can bring mega rewards, if you buy the right stocks.
Morgan Stanley has just issued a “full house” buy alert on international stock markets for the first time since 2009, claiming the worst of the slump is over. As panicky investors rush to sell, all five of its key timing indicators (valuation, fundamentals, risk, capitulation, and a combined market indicator) are screaming “buy!”. European equity strategist Graham Secker rates a number of “mega-cap” stocks that are ripe for the plucking, including five FTSE 100 favourites. Could these stocks reap mega rewards for you?
Back In Fashion
Burberry (LSE: BRBY) has been hit hard by the slowdown in the Chinese luxury sales market. Its share price is off almost 30% in just six months, but this is a company I have admired for several years, and today could certainly be styled as a tempting entry point. Strong growth in the US has helped to offset falling sales in China and Hong Kong, suggesting the current sell-off may have been overdone. With net cash of £552m, it is more than equipped to withstand any slowdown. Operating margins of 20%, an instinctive grasp of social media, new flagship stores and continuing profit growth should spare the stock a handbagging.
Turning Up The Heat
British Gas owner Centrica (LSE: CNA) has been surrounded by a bad odour ever since former Labour leader Ed Miliband threatened to freeze prices if he won power in this year’s election. The stock is down 40% since then, even though the electorate chose to freeze out Miliband instead. Falling gas and oil prices threaten Centrica’s £9bn investment in its upstream business, sparking a profit warning in February and 30% dividend cut. The decision to slash 4,000 jobs was taken as a sign of weakness rather than strong management. Low energy prices may continue to weigh but with management committed to dividend progression today could be a mega time to buy.
Imperial Might
Imperial Tobacco Group (LSE: IMT) has held pretty steady during recent troubles, and is up 18% over the past year. The continuing fall in cigarette volumes worries me, its market share is under pressure in the US, and revenue growth is slowing. But strong brands, cash discipline, a 4% yield and 7% drop in the share price over the last month could make now a good time to lock into a steady long-term income.
Off The Grid
National Grid (LSE: NG) has long been my favourite defensive utility stock. As a virtual monopoly in a heavily regulated industry, it has also avoided the political risk that has plagued Centrica. Its share price is down slightly over the last year, but nobody is complaining given today’s markets, and its solid long-term prospects in both the US and UK make it tempting in troubled times, especially given that 5% yield in a deflationary world.
‘Fone Home
I drifted away from Vodafone (LSE: VOD) after the Verizon sell-off, and was also concerned by its exposure to eurozone woes, which saw sales plunge in Spain and Italy. BT’s purchase of EE and the merger of O₂ and Three also hit its profile in the UK. European QE may yet spark a jobs revival and reduce youth unemployment, which would be good for revenues. Plus you have the added bonus of strong sales in India and Turkey. Down 8% over the last month, but yielding 5%, Vodafone could still be a good call.
