We asked our analysts to share their top stock picks for the coming month (the first five picks published yesterday and earlier today can be found here and here). What will today’s analysts back?
Harvey Jones: Bunzl
Three years ago, I went a bundle on specialist distribution group Bunzl (LSE: BNZL), describing it as one of the unsung heroes of the FTSE 100. It makes its money from supplying companies with a range of not-for-resale goods such as food packaging, first aid products, catering equipment, stationery, cleaning supplies, face masks and swabs, an unglamorous but profitable line of work.
Bunzl investors have had plenty to sing about since then, with its share price up 60%. Over five years, it’s up a heroic 161%. Bunzl’s aggressive acquisition strategy has driven growth, with this week’s results showing it spent a record £327m on 22 businesses in 2015. Adjusted operating profit and earnings per share leapt an impressive 7% at constant exchange rates although market response was fairly cool. Perhaps investors are deterred by Bunzl’s low 1.85% yield and pricey valuation of 22 times earnings. But that’s the price you pay for a quality stock.
Harvey Jones has no position in Bunzl.
Royston Wild: Dixons Carphone
Electricals colossus Dixons Carphone (LSE: DC) had a month to forget in February. The stock conceded almost 10% of its value in the period, but I believe this sets the stage for a glorious bounceback in March and beyond.
Latest ONS data highlighted the underlying strength of the British retail landscape, with sales growth of 2.3% in January representing the largest monthly increase for two years. And the release was particularly exciting for Dixons Carphone, with last month’s sales increase largely down to surging demand for ‘big ticket’ items like computers.
Predictions of a 5% earnings bounce for the year to April 2016 leave Dixons Carphone dealing on a very-reasonable P/E rating of 15.3 times. And forecasts of a 14% bottom-line bounce in fiscal 2017 drag the multiple down to a lip-smacking 13.5 times. I reckon this is a snip given the firm’s great growth prospects at home and overseas.
Fool contributor Royston Wild has no position in this company.
Peter Stephens: Imperial Brands
With investors being rather nervous regarding global economic growth prospects, defensive stocks continue to have appeal. One stock that enjoys a wide economic moat is Imperial Brands (LSE: IMB), with its financial performance being highly resilient.
Allied to this is considerable growth potential in e-cigarettes, while the company’s key brands continue to aid earnings growth, which is expected to be 12% in the current year. This puts Imperial Brands on a relatively low price-to-earnings growth (PEG) ratio of 1.3, which indicates upside potential even after its share price rise of 22% in the last year.
Furthermore, Imperial Brands is also set to increase dividends by over 10% this year, which puts it on a yield of 4.1%. With the company’s payout ratio standing at 65%, there’s scope for further rises in dividends, making Imperial Brands a top notch income, defensive, growth and value play.
Peter Stephens owns shares in Imperial Brands.
Jack Tang: Land Securities Group
Shares in Land Securities (LSE: LAND) have fallen by 15% since the start of 2016 as fears grow over a potential downturn in the UK commercial property market.
While there are indications that the market is indeed slowing down, such as falling investment into the sector and slowing rent rises, the property market remains resilient. The chronic shortage of high quality space available for businesses and a relatively robust UK economy underpin the positive outlook for the sector.
What’s more, Land Securities has a strong pipeline of development properties nearing completion, which positions it to benefit from further rental income growth in the near term.
I think the REIT offers a compelling buying opportunity, with shares currently trading at a 30% discount to its net asset value (NAV) and yielding 3.3%.
Jack owns shares in Land Securities Group.
