Top stocks for July

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 July, and this is what they had to say:

Royston Wild: ASOS

I would consider recent share price weakness at ASOS (LSE: ASC) as a fresh opportunity for dip buyers to nip in.

The fashion favourite has stepped away from the record highs above £64.25 per share punched in early June. But I reckon this month’s upcoming financials (slated for Thursday the 13th) could prompt another upswing should, as I expect, titanic international sales growth continue to drive group revenues. Total retail sales jumped 38% in September-February, ASOS announced in April.

The City expects ASOS to deliver spectacular earnings growth of 23% and 29% in the years to August 2017 and 2018 respectively. So while the company may carry a super-elevated P/E ratio of 77.2 times, I reckon the company’s stunning top-line momentum merits such a premium.

Royston Wild has no position in ASOS.

Paul Summers: Coats Group

Industrial thread and consumer textile business, Coats (LSE: COA) is my pick. Its last trading update was very encouraging, with management stating that it now expects full-year results to be ahead of previous expectations.

Operating margins and returns on capital continue to improve at the Uxbridge-based company and last December’s settlement with the Pensions Regulator should make its stock more attractive to potential investors.

Despite soaring over 200% in the last twelve months, shares in the £1.1bn cap (and new addition to the FTSE 250) still look fairly valued at 16 times earnings. As such, I wouldn’t be surprised if recent momentum was maintained before interim results are announced at the end of the month.

Paul Summers has no position in Coats.

Peter Stephens: easyJet plc

While the outlook for consumers has deteriorated this year, easyJet (LSE: EZJ) has surged 35% higher. Its focus on efficiencies and improving the customer experience has been popular. Its budget pricing may also generate rising sales while inflation is higher than wage growth.

easyJet has a forward P/E of 17.3, but is forecast to grow earnings by 24% next year. This means it has a PEG ratio of 0.7, which indicates more capital growth could be ahead. In addition, its forward dividend yield of 3.5% from a payout which is covered twice by profit may also boost investor sentiment during a period of higher inflation.

Peter Stephens owns shares in easyJet.

Rupert Hargreaves: Esure

Esure Group (LSE: ESUR) has put in an outstanding performance this year. Year-to-date shares in the company have risen 46% excluding dividends. Including income, the return is more than 51%. After these gains, shares in the company look relatively expensive trading at a forward P/E of 16.9, but they could still head higher. 

City analysts have pencilled in earnings per share growth of 15% for Esure next year, putting the company on a 2018 P/E of 14.7, which isn’t so demanding. At the same time, the shares are set to yield 4.1% this year and 4.5% for 2018. Even if the shares go nowhere over the next 24 months, this dividend income will still provide investors with a juicy 8.5% return and with the payout covered 1.5 times by earnings per share, there’s scope for a special dividend as well.

Rupert does not own shares in Esure. 

Bilaal Mohamed: GKN

My top stock for July is global engineering group GKN (LSE: GKN). The Redditch-based firm serves both the automotive and aerospace markets, with the latter expected to cash in on Donald Trump’s push for increased military spending in the coming years. 

The new commander-in-chief has vowed to increase spending on infrastructure and defence, and this had helped many defence and engineering stocks to rally since last November’s bizarre US election result. 

GKN’s share price has performed well over the past year, rising 28%, but I still see further upside over the longer term, with rising earnings leaving the shares trading on a very modest P/E rating of just 10 for 2017. 

Bilaal has no position in any shares mentioned.

G A Chester: Imperial Brands

Tobacco group Imperial Brands (LSE: IMB) currently looks excellent value to me. Its shares have fallen back from a spring high of near £40, giving investors today an opportunity to ‘buy on a dip’.

Imperial trades on a forward 12-month P/E of 12.9. This is markedly better value than the 18.4 sported by its FTSE 100 peer British American Tobacco. In addition, Imperial’s dividend yield is a generous 4.9% — compared with its rival’s market-average 3.5% — and the board is committed to increasing the payout by at least 10% a year for the foreseeable future. What’s not to like?

G A Chester has no position in Imperial Brands or British American Tobacco.

Roland Head: Morgan Sindall Group

Infrastructure and construction group Morgan Sindall Group (LSE: MGNS) has climbed 73% so far this year, taking the shares to a post-2007 high of 1,288p. It would be easy to dismiss this stock as a missed opportunity, but I believe there could still be more to come.

The company’s strong growth this year has come on the back of multiple earnings upgrades. Morgan Sindall stock doesn’t look overly expensive to me, on a forecast P/E of 13.5 and with a prospective yield of 3.1%.

An interim earnings report is due early in August. Expectations of a strong performance could well drive the shares higher in July.

Roland owns shares of Morgan Sindall

Kevin Godbold: N Brown Group

After years of declining earnings, plus-size fashion clothing retailer N Brown Group (LSE: BWNG) looks set to return to earnings growth next year after shifting its offering from mail-order to internet-led trading over several years. Today, a healthy-looking 71% of revenue originates online.

An update on 20 June revealed overall online traffic increased 34% year-on-year during the first quarter. Smartphones accounted for 51% of all sessions, with all mobile devices accounting for 74%.

N Brown is now plugged into the modern world of armchair shoppers and the depressed stock looks set to resurge during July onwards, making the firm a decent play on the theme of recovering retailers.

Kevin owns shares in N Brown Group

Ian Pierce: Paypoint

Slow and steady growth with a fantastic dividend is the story for retail payment processor PayPoint (LSE: PAY). Re-focusing on its core retail network is paying off for the firm with full year net revenue up 6.2% and earnings per share up 2.9%.

But the main attraction is the company’s hugely cash generative operations that supported a 45p ordinary dividend last year that represents a 4.9% yield. This was topped off with a 36.7p special dividend that will be repeated in each of the next four years barring any potential acquisitions. With tonnes of cash on the books, steady growth and massive dividends PayPoint is a top buy for me.

Ian Pierce has no position in PayPoint.  

Edward Sheldon: Playtech

I actually picked out gaming software specialist Playtech (LSE: PTEC) as my top stock for April, and I’m going to pick the company again as my top pick for July as the story remains attractive in my view.

Playtech released an upbeat AGM trading statement in May, with Chairman Alan Jackson stating that the company is “delivering a strong performance in 2017 driven by organic growth and recent strategy acquisitions.” Revenue and profit after tax are forecast to jump 24% and 49% respectively this year.

However, news this week that founder Teddi Sagi is selling an 11.5% stake in the company has resulted in the share price pulling back a little, and on a forward looking P/E ratio of just 12.9 I believe Playtech shares offer strong value right now.

Edward Sheldon has no position in Playtech.

Jack Tang: Unilever

My pick for July is Unilever (LSE: ULVR). Now, you may think the company seems expensive with shares trading at 26.5 times trailing earnings, but there are valid reasons why investors may be willing to pay a premium for the stock.

The consumer goods giant is set to make big changes following a failed attempt by Kraft Heinz to buy  the company back in February. It’s been a big wake-up call for Unilever, with management, so far, promising shareholders to accelerate its cost saving initiative, buy back shares to the tune of €5bn and increase dividends by 12%.

Looking ahead, I think there’s plenty more to come as the company conducts a strategic review of its sprawling product portfolio and introduces new measures to boost returns and improve long-term value creation. I reckon this leaves plenty of scope for further upside.

Jack Tang does not own shares in Unilever.

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