Top stocks for August

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

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Peter Stephens: AstraZeneca 

AstraZeneca (LSE: AZN) has experienced a difficult month, with its shares falling 16% following a disappointing update on 27th July. A clinical trial of a key lung cancer drug failed to deliver positive results, and investor sentiment is now weaker.

This could present a buying opportunity for the long term. AstraZeneca still has a robust and improving pipeline, which could deliver improving profitability in future years. With a strong balance sheet and resilient cash flow, it could engage in further M&A activity to boost its outlook. A dividend yield of 4.9% and a P/E of 15 suggest it offers value and income appeal right now.

Peter Stephens owns shares in AstraZeneca

Ian Pierce: Equiniti

Equiniti (LSE: EQN) is far from a household name but, as the company provides share registration services for half of the FTSE 100 and manages more than 20 million shareholder accounts, most investors probably use it indirectly. Alongside share registration, the group provides companies with other mission-critical but non-core services such as compliance and risk management software.

The stickiness of these services leads to around 50% of revenue being recurring as well as pricing power that is evident in the company’s 24.2% EBITDA margins posted last year. And with expansion into the US kicking off with a large £176m acquisition, Equiniti’s shares look attractively valued to me at 12 times trailing earnings.  

Ian Pierce has no position in Equiniti. 

Harvey Jones: Tritax Big Box REIT

The specialist property sector is booming, delivering four of the top five fastest-growing investment trust launches of the last five years, according to the Association of Investment Companies.

Tritax Big Box (LSE: BBOX) has grown fastest of all, posting an impressive 979% increase in assets under management since launch in December 2013. So far this real estate investment trust (REIT) has given investors a total return of 64%.

Recent acquisitions include the National Distribution Centre at Trax Park, Doncaster, for £20.9m in May, and the Littlebrook Power Station, Dartford, in July for £65m, where the REIT plans to build one of the largest Big Box logistics parks inside the M25.

The trust yields 5.73% but some may wish to wait until the premium of 14.83 narrows.

Harvey Jones has no position in Tritax Big Box REIT.

Royston Wild: Taylor Wimpey

I reckon Taylor Wimpey (LSE: TW) should add to the recent collection of confident trading statements from Britain’s housebuilders in August.

Interims are pencilled in for Tuesday August 1st, and I am confident of another perky report following spring’s encouraging update. Private net reservations at Taylor Wimpey jumped 16% during January 1st to April 27th, the company citing “positive customer demand and good mortgage availability,” while its order book increased to 9,219 homes from 8,811 a year earlier.

The stock’s ultra-low valuations certainly leave plenty of scope for a fresh share price spurt. A predicted 2% earnings rise in 2017 creates a forward P/E ratio of just 10.1 times. And a monster 7.1% yield adds extra incentive for investors to pile in.

Royston Wild owns shares in Taylor Wimpey.

Roland Head: Persimmon

FTSE 100 housebuilder Persimmon (LSE: PSN) generated £343m of surplus cash in 2016, comfortably covering its next planned capital return of 110p per share. The firm’s earnings are expected to rise by 12% in 2017, as housing demand remains strong. Sales rose by 12% to £1.66bn during the first half of 2017, during which the group generated another £207m of surplus cash. 

Persimmon shares are now worth double their 2007 high. But a price/free cash flow ratio of 11 and a forecast yield of 5.2% means this stock still looks affordable to me. With interim results due on 22 August, I believe further gains are possible.

Roland does not own shares of Persimmon.

Paul Summers: Bango

I think mobile payment platform provider Bango (LSE: BGO) is a very interesting proposition for risk-tolerant, patient investors. Clients of the £180m cap already include tech giants Google, Microsoft, Samsung and Amazon.

In its most recent update, Bango revealed that annualised end user spend (EUS) at the end of June exceeded £300m a year — over 50% higher than that achieved six months before.  A proportion of this was driven by the launch of Direct Carrier Billing for Amazon in Japan. The company is now firmly on track to hit its target of doubling this figure by December 2017.

While the stock’s already up over 200% in the last 12 months, I think this positive momentum could continue in anticipation of mid-September’s interim results.

Paul Summers has no position in Bango.

Edward Sheldon: WPP

Recent share price weakness in advertising giant WPP (LSE: WPP) has presented an attractive entry point, in my opinion. The shares have slumped from 1,920p to 1,550p over the last five months, on the back of a cautious short-term outlook from the company in March, and both a cyber attack and a downgrade from broker Exane BNP Paribas in June.

However, for those with a long-term mindset, I believe the share price drop has created an opportunity. Earnings per share are forecast to rise 11% this year to 126p, meaning that at the current share price, WPP now trades on a forward looking P/E ratio of just 12.3. Furthermore, the stock now looks particularly attractive from a dividend investing point of view, with the forward looking dividend yield currently above 4%.

Edward Sheldon owns shares in WPP.

Rupert Hargreaves: Vesuvius

Molten metal flow engineering might not sound like the most exciting business around, but it’s a highly lucrative business for Vesuvius (LSE: VSVS). After several years of stagnant growth, City analysts are expecting the firm to report earnings per share growth of 20% this year, followed by growth of 12% for 2018. Results from the company at the end of July confirmed that it is on track to hit this target thanks to a buoyant global steel market.

Based on City growth projections, shares in Vesuvius look undervalued, trading at a forward P/E of 16.5 and PEG ratio of 0.8. As well as offering growth at a reasonable price, Vesuvius supports a dividend yield of 2.9%, and the payout is covered twice by earnings per share.

Rupert does not own shares in Vesuvius. 

Bilaal Mohamed: Crest Nicholson

My top stock for August is residential property developer Crest Nicholson (LSE: CRST). The Surrey-based housebuilder remains committed to increasing its shareholder rewards, with dividends swelling from just 6.5p per share in 2013 to last year’s huge full-year payout of 27.6p. City analysts are expecting this year’s payouts to go even further, with consensus estimates suggesting a total dividend of 34.03p per share for the full year, resulting in a massive prospective yield of 6.3%.

In recent months the FTSE 250-listed business has seen its share price retreat from May’s all-time highs of 636.5p, but I believe this is just a temporary retracement, and expect to see a continuation of the upward surge that has led to the shares doubling in value in less than five years. With earnings predicted to rise by 21% by the end of fiscal 2018, I believe a P/E rating of eight is simply far too cheap for this rapidly growing business.

Bilaal has no position in any shares mentioned.

Alan Oscroft: Unilever

For years I’ve been eschewing Unilever (LSE: ULVR) shares as perpetually overpriced, with dividend yields in the 3-4% range not really looking good enough to offset P/E multiples of around 20.

But looking back over the company recently, it’s struck me that I’ve been a chump all that time. Over five years, the share price has risen by 87% (on top of those healthy dividends), and that’s trounced the FTSE 100. And over 10 years, we’re looking at a 180% gain (compared to the FTSE’s meagre 18%), and a climb of 1,300% since 1988.

Next time you sip Lipton tea, refresh yourself with Dove soap, or pour Persil into your washing machine, think about how many millions around the world are doing exactly the same thing. 

Will I be reconsidering Unilever when I next evaluate my SIPP and ISA investments? You bet I will.

Alan Oscroft does not own shares in Unilever.

G A Chester: Randgold Resources
Gold stocks can thrive when uncertainty or fear sends other equities tumbling. Having exposure to the sector can mitigate a portfolio’s plunge into the red. There’s also potential to take profit on the soaring gold stock and recycle it into bashed-up bargains.
Randgold Resources (LSE: RRS) is a good choice for gold exposure, in my view. It’s the sector heavyweight and, unlike the metal itself and many smaller miners, offers a handy 2% dividend yield. As the shares are well below last year’s post-Brexit-vote high of over £90, I think now could be a good time to buy a few.
G A Chester has no position in Randgold Resources.

Jack Tang: Persimmon

Shares in housebuilder Persimmon (LSE: PSN) have done exceptionally well in the last few months and, in my view, they could still be a great addition for investors looking for growth at a reasonable price.

Its last trading update was very encouraging, as the company reported continued growth in completion volumes and a steady improvement in average selling prices. Revenue in the first-half grew by 12% to reach £1.66bn, with the housebuilder set to release more details on its first-half performance on 22 August.

Despite a year-to-date gain of 41%, shares in Persimmon are valued at just 10.8 times expected earnings this year.

Jack Tang has no position in Persimmon.

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.

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