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Top shares for August

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

Peter Stephens: Sainsbury’s

Recent acquisition activity by Sainsbury’s (LSE: SBRY) seems to have strengthened its growth prospects. The acquisition of Asda could lead to a cost advantage over rivals due to synergies and economies of scale. Meanwhile, the purchase of Argos could create cross-selling opportunities across the Sainsbury’s and Asda store estates.

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With the outlook for UK consumers being downbeat, now could be the right time to buy the stock. Falling inflation and improved recent sales performance could help to push its share price higher. A forward dividend yield of 3.5% suggests that Sainsbury’s could offer further upside potential following recent gains.

Peter Stephens owns shares in Sainsbury’s.

Rupert Hargreaves: British American Tobacco

My top stock for August is British American Tobacco (LSE: BATS). Over the past 12 months, British American has faced selling pressure from investors due to concerns about the growth potential offered by the reduced-risk tobacco product market, where the company has been investing heavily to reduce its dependence cigarette sales.

Despite investor concerns, management remains confident in the potential for this market, and I believe the selling has been overdone. Indeed, after recent declines, the stock trades at a forward P/E of just 12.5 and yields 5.4% — the lowest valuation in five years.

Considering British American’s history of producing returns for investors (15% per annum for the past 15 years), I believe this is an opportunity that’s too good to pass up.

Rupert owns shares in British American Tobacco. 

Ian Pierce: Unilever

With trade tensions escalating and our current decade-long bull market starting to look a little vulnerable, I’m picking consumer goods stalwart Unilever (LSE: ULVR) as my top stock for August.

On top of its defensive characteristics, 3% dividend yield and generous share buyback programme, I like Unilever because of its management team’s focus on long-term growth through constantly buying up up-and-coming businesses that it can expand through its globe-spanning distribution network.

And while it may take a few years for the benefits of acquisitions like Dollar Shave Club to flow through, the current focus on cutting costs and expanding personal care sales is helping management achieve consistent 3-5% sales growth as well as making good progress in hitting its 20% operating margin target.

Ian Pierce does not own shares of Unilever.

Royston Wild: The Gym Group

The Gym Group (LSE: GYM) is scheduled to release fresh trading details on August 29th. This means that savvy investors should consider snapping the stock up right about now, in my opinion.

The fitness fanatics have a history of peppering the market with strong updates, and last month announced that the number of members on its books leapt to 668,000 as of the close of May, up 31.8% year-on-year. The news sent The Gym Group’s share price soaring, and I am expecting a similar occurrence in the wake of August’s update.

City analysts are expecting the firm’s earnings to leap 25% and 38% in 2018 and 2019 respectively. A subsequent forward P/E ratio of 31.1 times isn’t that demanding given the probability of stratospheric profits growth long into the future, in my opinion.

Royston Wild does not own shares in The Gym Group.

Paul Summers: Boohoo Group

I think fast fashion firm – and newly renamed – Boohoo Group (LSE: BOO) could do well over the next month as investors position themselves for the latest set of interim numbers, due late-September.  

While its seriously high valuation gives the company no room for error, I suspect the sizzling summer we’ve experienced should give rise to some exceptional numbers and a great outlook on trading.

Boohoo is more than just a short-term punt, of course. On a longer time horizon, ongoing investment in its warehouses — and rapidly growing contributions from Pretty Little Thing and Nasty Gal — should help the Manchester-based business achieve its goal of £3bn worth of sales, not to mention broker estimates of 300p a share.

Paul Summers owns shares in Boohoo Group

G A Chester: Randgold Resources

I believe having some exposure to gold is a sensible idea. It can add a bit of stability to a portfolio when markets take fright and demand for the yellow stuff rockets. You can invest in gold itself or in a gold miner. Among miners, I see FTSE 100 giant Randgold Resources (LSE: RRS) as a good stock to buy.

You take on operational risk with a miner but Randgold has a strong long-term record. Furthermore, unlike owning the metal, owning shares in this blue-chip business means you also receive generous dividends — a forecast yield of 4% this year rising to 5.3% next.

 G A Chester has no position in Randgold Resources.

Alan Oscroft: Esure Group

Shares in Esure Group (LSE: ESUR) have been in a slump over the past 12 months, presumably because of increasing competition in the motor insurance market. But it does seem to be keeping healthily ahead of its rivals, with gross written premiums climbing with every results update.

EPS looks set to continue its recovery after a 2-year dip to 2016, and the well-covered dividends were never under threat. Forecasts suggest yields of around 7% and rising, and on a P/E of under 10, I see Esure shares as an oversold bargain right now.

Alan Oscroft does not own shares in Esure Group.

Roland Head: Inchcape

Inchcape (LSE: INCH) could be an excellent way to invest in the car industry without being too heavily exposed to the uncertain UK car market.

This FTSE 250 firm operates as a car distributor or dealer in more than 30 countries. The benefits of this approach were highlighted in the firm’s recent trading update. Weaker performances in the UK and Europe were offset by stronger markets in Asia and Australasia, which account for about 60% of profits.

Inchcape shares currently trade on about 12 times forecast earnings and offer a 3.3% dividend yield. They look good value to me.

Roland Head has no position in Inchcape.

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The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended boohoo group. 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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