There are still some trading days left until Christmas and with markets disappointing this year, there are plenty of bargains to be had. The following two companies could make ideal stocking fillers and should have far greater longevity than most of what you buy over the festive period.
People aren’t just driving home for Christmas they are also flying and FTSE 100-listed International Consolidated Airlines Group (LSE: IAG) should reap the benefit. IAG owns British Airways, Iberia, Aer Lingus and budget airlines Level and Vueling, and will benefit from people jetting home to be with family at Christmas (or flying away from them).
The £12.2bn company has had a bumpy year, with the share price around 3% lower than 12 months ago as it has been caught up in Brexit turbulence, as well as crew and air traffic control disputes. The UK competition authority has launched an investigation into the 10-year revenue-sharing joint venture agreement with Finnair and American Airlines, which hasn’t helped.
Chief executive Willie Walsh recently reported a positive third-quarter performance with a small increase in operating profits before exceptional items from €1.45bn to €1.46bn year-on-year, “despite significant fuel cost and foreign exchange headwinds”. With oil falling to around $60 a barrel, fuel costs are now turning into tailwinds.
IAG is currently valued at just 5.9 times forecast earnings and looks cheap enough to buy, with Walsh setting out plans to increase target underlying operating profits to €7.2bn a year for 2018-22, up from €6.5bn. Plus you get a decent forecast yield of 3.9%, and cover of 4.3. The biggest danger is that a UK and European slowdown could hit traffic.
All wrapped up
This is the most wonderful time of year for greetings card and gift wrapping company IG Design Group (LSE: IGR). This AIM-listed £450m company has a large global reach, with operations in the Americas, Europe and Australia. Its products now retail in more than 200,000 stores across 80 countries and it is expanding through acquisition.
It has also been one of the most exciting stocks of the last five years, up an incredible 850% over that time, yet hasn’t attracted the investor excitement you might expect given its soaraway growth. I wrote about this small-cap 12-bagger earlier this year, noting that it has even managed to defy the retail slowdown affecting bricks and mortar retailers on the stricken UK high street.
Christmas on the cards
The group recently announced a reported 23% rise in revenue to £205m, driven by organic growth of 4% and the acquisition of Impact Innovations Inc in the US, while underlying profit before tax jumped an impressive 76% to £18.5m.
Unsurprisingly it isn’t cheap, currently trading at 21.6 times forward earnings, but it isn’t that expensive given such strong growth, with earnings forecast to rise 13% and 17% over the next two years. You even get a small yield, currently a forecast 1.5%, with cover of 1.3x, but this stock is all about the growth. I’m hoping IAG and IG will both shine at Christmas, and for years to come.