Top stocks for June

We asked our analysts to share their top stock picks for the coming month.

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We asked our writers to share their top stock picks for the month of June, and this is what they had to say:

Kevin Godbold: B&M European Value Retail

While I tipped the same stock for April, I firmly believe an attractive offering and inflation-squeezed consumer incomes drive customers to B&M European Value Retail SA’s (LSE: BME) estate of 500 or so UK stores, leading to robust growth in revenue, cash inflow and earnings.

The recent full-year report revealed raised expansion plans from a target of 850 UK stores to 950, suggesting a positive trading outlook. Like-for-like gains and a strong pipeline of 40-50 new stores planned for the UK for the remainder of 2017, and 15 in Germany, look set to drive growth. Recent vibrant trading and these increased growth expectations make me optimistic regarding shareholder returns for June onwards.

Kevin owns shares in B&M Value Retail SA.

Royston Wild: BAE Systems

The possibility of intensifying political intrigue in June encourages me to believe that BAE Systems (LSE: BA) could continue to power forwards in the weeks ahead.The saga surrounding the Trump presidency shows no signs of slowing and is likely to keep the defence sector well bought. And on the other side of the Atlantic, anything other than a crushing Tory majority at next week’s general election could see safe-haven stocks surge. A predicted 8% earnings rise in 2017 leaves BAE Systems dealing on a P/E ratio of 15.3 times, just above the FTSE 100 average of 15 times. And in my opinion, this leaves plenty of scope for a fresh ascent.

Royston Wild has no position in BAE Systems.

Rupert Hargreaves: Burford Capital

The provision of arbitration and litigation finance may not seem like the most exciting business, but it is certainly a highly profitable one, as shareholders in Burford Capital (LSE: BUR) have discovered over the past four years. 

Since 2013, Burford’s pre-tax profit has exploded over 4,000% from £2.2m to £104m — and City analysts are predicting further growth this year, pencilling in a pre-tax profit of £110m and earnings per share of 49p, up 19% year-on-year. 

Over the past five years shares in Burford have returned 700%, and as the company’s growth continues, it looks as if shares in Burford can continue to head higher. Even though the shares currently trade at a forward P/E of 17.3, I believe this is a premium multiple worth paying for such a fast growing business.

Rupert does not own shares in Burford Capital. 

Ian Pierce: Experian

This month I’m once again drawn to take a closer look at credit check behemoth Experian (LSE: EXPN), the defensive favourite with reliable non-cylical revenue and a very wide moat to entry for competitors. 

Yet Experian is more than a low growth defensive as it also offers huge growth potential thanks to its large Brazilian business that is growing by leaps and bounds, as consumers there increasingly use credit just as often as consumers in the UK or US.

With its shares priced attractively at around 20 times forward earnings while offering big shareholder returns and future growth, Experian is one stock I’d love to own for the long term.

Ian Pierce has no position in Experian. 

Alan Oscroft: Renewi

The turnaround that seems on the cards for waste management specialist Renewi (LSE: RWI) has made me sit up and take notice this month, after a year the company described as “transformational”.

There’s been some hefty restructuring and a rights issue at the firm previously known as Shanks Group, and it’s led to cracking growth forecasts coupled with a better-than-average (and rising) dividend. 

With a modest P/E of 12 for March 2019 and a PEG ratio of just 0.2, along with a forecast 3.7% dividend yield, at around 95p Renewi looks like a tasty recovery prospect to me.

Alan Oscroft has no position in Renewi.

Edward Sheldon: Saga

My top stock for June is ​Saga​ (LSE: SAGA) and there’s several reasons I like the stock.

First, as a service provider for the over-50s, I reckon demand for Saga’s products should remain strong in coming years due to the UK’s ageing population. Second, the stock looks to have excellent dividend potential, with FY2017’s payout of 8.5p equating to a yield of 4.2% at the current share price, and this is forecast to grow 9% next year. Dividend coverage of 1.66 times suggests the dividend is sustainable. Lastly, on a forward looking P/E of 14, Saga looks to offer reasonable value at present, despite the strong run the FTSE 350 index has enjoyed recently.

Edward Sheldon has no position in Saga.

Jack Tang: Sage Group

Sage Group (LSE: SGE) might not appear cheap with shares trading at 25.8 times trailing earnings, but there are many reasons why investors are prepared to pay a premium for the company. First of all, the business software company is on a solid footing as it is making steady progress with the transition from one-off software sales to subscriptions.

May’s encouraging trading update showed continued momentum in new customer acquisitions, with management expecting further growth to come in the second half of 2017. City analysts are also bullish, with consensus forecasts calling for underlying earnings growth of 16% this year, with a further increase of 7% in the following year. And based on these estimates, Sage seems fairly valued to me, with shares trading at 20.2 times its expected 2018 earnings.

Jack Tang has no position in Sage Group.

Bilaal Mohamed: The Gym Group

My top stock for June is low-cost gym operator The Gym Group (LSE: GYM). The Guildford-based health & fitness group has to date been very successful with its disruptive business model, allowing its members to use its facilities on a pay-as-you-go basis, without paying a premium or being tied into a contract. By the end of 2016 membership had grown to over 448,000, a 19.1% increase on the previous year, helping the group to achieve a 22.6% rise in full-year revenues to £73.5m, and swing to a pre-tax profit of £6.9m.

I think there’s plenty more to come from this rapidly expanding chain, with 15 new sites added last year, bringing the total to 89, and a further 15-20 new openings earmarked for 2017. The shares may look expensive at 26 times forecast earnings, but this falls to 22 times next year, and in my view is not too demanding given the prospects for future growth.

Bilaal has no position in The Gym Group.

G A Chester: Vectura

Shares of respiratory drugs and devices specialist Vectura (LSE: VEC) have fallen over 25% since March. A large part of this has come since an approval delay for a generic version of GlaxoSmithKline‘s Advair Diskus asthma drug. This is somewhat disappointing but Vectura and its FTSE 100 partner Hikma Pharmaceuticals are confident approval will be given in due course.

More importantly, Vectura has become a major player in its field since merging with fellow FTSE 250 firm Skyepharma this time last year. I believe the current depressed share price represents a great opportunity to buy into a compelling long-term growth story.

G A Chester has no position in Vectura or Hikma.

Roland Head: Vesuvius

FTSE 250 manufacturing group Vesuvius (LSE: VSVS) makes systems used to handle molten metal in steel works and foundries. Demand for the firm’s specialist products appears to be improving, and the company recently reported “a strong Q1 2017”.

City analysts have turned increasingly bullish on Vesuvius over the last three months. Adjusted earnings per share are now expected to rise by 20% to 36.3p this year, putting the stock on a forecast P/E of 16, with a prospective yield of 3%.

Institutional buying following these upgrades could drive the shares higher. I’d rate Vesuvius as a buy at current levels.

Roland does not own shares of Vesuvius.

Paul Summers: XP Power

My pick for June would be critical power control component developer XP Power (LSE: XPP). Back in April’s trading update, the company stated that positive momentum seen in the second half of 2016 had continued into 2017. Group revenues and order intake in Q1 were up 23% and 36% respectively on the previous year (in constant currency).

XP Power has a robust balance sheet (£8.8m net cash position at the end of March), enviable free cashflow, a history of stellar returns on capital and high operating margins. At 22 times forward earnings, it’s certainly not cheap to buy but I suspect that the shares will continue to perform strongly over the coming weeks in expectation of further good news when the company announces interim results in late July.

Paul Summers has no position in XP Power

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

The Motley Fool Staff has no position in any shares mentioned. The Motley Fool UK has recommended Experian, Sage Group, and XP Power. 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.

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