Top stocks for September

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

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Paul Summers: Avon Rubber

Given the ever-increasing tensions between North Korea and the rest of the world, my top pick for September would be high-tech gas mask maker Avon Rubber (LSE: AVON). The fact that the stock (trading on 15 times forecast earnings) is a lot cheaper than it has been for quite a while is even more of an incentive. Interim results in May were positive and I suspect the company’s forthcoming update will highlight further progress.  

Aside from the above, Avon bears all the trademarks of a high-quality company. It boasts excellent free cashflow, a bulletproof balance sheet and generates consistently high returns on the money it invests. While a 1.3% dividend yield is unlikely to blow anyone away, it should also be highlighted that Avon has been hiking its annual payout by at least 20% for many years now.

Paul Summers has no position in Avon Rubber

Edward Sheldon: BAE Systems

Recent share price weakness at BAE Systems (LSE: BA) has provided an investment opportunity, in my opinion. The defence giant has seen its shares fall from 675p in June, to under 600p today, and at the current share price, the stock now trades on a forward looking P/E ratio of just 13.7, with a yield of a robust 3.6%.

With global political uncertainty becoming the new normal in recent years, I believe demand for defence – both traditional and cyber – will remain strong, and BAE Systems looks well-placed to capitalise.

Management recently commented that “with the expected improvement in the defence budget outlook in a number of our markets, the Group is well placed to continue to generate good returns for shareholders”.

Edward Sheldon owns shares in BAE Systems

Ian Pierce: Britvic

Income-starved investors have fallen back in love with high-yielding consumer staples stocks in 2017, but all the bargains haven’t disappeared just yet as diversified drinks firm Britvic (LSE: BVIC) still trades at just 12 times earnings. With market-leading brands in the UK, Ireland and France kicking off considerable cash flow, the company’s 3.29% yielding dividend is well covered and has room to grow in the coming years thanks to the firm’s healthy balance sheet.

And there’s growth potential to boot, as the company is expanding into both Brazil and America. With a sane valuation, good growth prospects and a healthy dividend, I’d take a closer look at Britvic in September.

Ian Pierce has no position in Britvic. 

Royston Wild: Bunzl

Bunzl’s (LSE: BNZL) trading update late last month underlined why it is such a brilliant pick for growth seekers.

The support services star saw revenues detonate 20% during January-June, to £4.12bn, the company benefiting from sterling’s slump and robust organic demand — sales at constant currencies improved 7% year-on-year.  And the result propelled adjusted pre-tax profit 18% higher to £248.3m.

Thanks to its broad geographic handprint and broad scope of operations, Bunzl has been able to grind out earnings growth year after year, in good times and bad. And the City expects it to keep this run going with rises of 6% in both 2017 and 2018.

I reckon the business is fully worthy of its slightly-toppy forward P/E ratio of 20.5 times.

Royston Wild does not own shares in Bunzl.

Rupert Hargreaves: Carnival

Shares in cruise operator Carnival (LSE: CCL) have been on a roll over the past 12 months. Since August last year, the shares have gained 45% as the firm has benefited from tailwinds such as low fuel costs, rising demand from customers and the weak pound. Together these tailwinds helped the company grow earnings per share by 65% for fiscal 2016. Analysts expect these positive factors to continue pushing EPS higher by 12% for fiscal 2017 and 16% for 2018. Off the back of this growth, Carnival’s current valuation of 16.4 times forward earnings seems appropriate. What’s more, steady double-digit earnings growth should support further share price appreciation. The shares yield 2.4%, and the payout is covered 2.5 times by EPS. 

Rupert Hargreaves does not own shares in Carnival. 

G A Chester: Domino’s Pizza Group

Domino’s Pizza (LSE: DOM) shares have fallen by a third over the last six months, as annual earnings growth for the next couple of years is expected to fall to mid-to-high single digits from double digits.

The company is giving up some gross margin to improve value for customers in the face of a more uncertain outlook for UK consumers. I believe this is the right near-term strategy for the dominant player in the market and will reap longer-term rewards. On an historically low sub-20 P/E, I see now as a great time to buy a slice of the business.

G A Chester has no position in Domino’s Pizza.

Bilaal Mohamed: National Grid

My top stock for September is the ever-popular National Grid (LSE: NG). With no direct competition to worry about, it could be argued that this FTSE 100 stalwart is one of the safest shares on the London Stock Exchange. The company is responsible for the transmission and distribution of electricity and gas in the UK, and remains a firm favourite among long-term buy-and-hold investors.

National Grid’s defensive qualities should make it immune to whatever Brexit or Donald Trump may throw at us in the coming years, making it a great place to park your hard-earned cash. Shareholders are rewarded twice a year with an attractive inflation-proof dividend that offers a prospective yield of almost 5%.

Bilaal Mohamed has no position in any shares mentioned

Roland Head: PageGroup

Shares of recruitment firm PageGroup (LSE: PAGE) have outperformed several key rivals so far this year. I believe they could continue to perform well over the coming months.

One attraction is the firm’s size and diversity. With operations in Europe, Asia and the Americas, this £1.6bn group isn’t overly exposed to Brexit risks.

A second attraction is that PageGroup reported net cash of £88.9m at the end of June, enabling management to declare a £40m special dividend this year. Analysts expect earnings per share growth of 13% this year. Although the forecast P/E of 18 isn’t cheap, I think it could still be decent value.

Roland Head does not own shares of PageGroup.

Peter Stephens: Taylor Wimpey

The UK housebuilding sector continues to offer a positive trading environment for Taylor Wimpey (LSE: TW). The imbalance between supply and demand means that even with the uncertainty caused by Brexit, the housebuilder continues to post strong earnings growth. This year its bottom line is due to rise by 6%, while next year it is expected to increase by 8%.

Despite its forecast growth rate, Taylor Wimpey has a P/E of just 10.1. With a dividend yield above 6% and a strong balance sheet, it also offers a high income return as well as relatively low risk. Therefore, even in a volatile stock market, it could post high returns.

Peter Stephens owns shares of Taylor Wimpey.

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 UK owns shares of and has recommended Britvic. The Motley Fool UK has recommended Domino's Pizza. 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

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