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Top shares for December 2019

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Royston Wild: Hollywood Bowl Group

With final results slated for Friday December 13th, I reckon now is a great time to load up on Hollywood Bowl Group (LSE: BOWL) shares.

The ten-pin-bowling operator stunned the market with fresh financials last month, ones in which it advised that profits would beat expectations and rise 10% for the fiscal year to September. Signs that strong trading has stretched into the new year would likely give Hollywood Bowl’s share price an extra boost, though this is not the only reason to be optimistic.

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The firm also suggested in October that, owing to its strong balance sheet, it could start returning excess cash to its shareholders soon. Clearly good news on this front could really help the AIM company fly.

Royston Wild does not own shares in Hollywood Bowl Group.

Rupert Hargreaves: Mitchells & Butlers

Shares in Mitchells & Butlers (LSE: MAB) have risen nearly 100% over the past six months, making the company the best performing stock in the FTSE 350. It doesn’t look as if this trend is going to come to an end any time soon. 

Shares in the pub and restaurant operator have charged higher in 2019 as the company’s sales have grown faster than expected, and costs have been kept under control. 

Even after this performance, Mitchells still looks cheap. The stock is trading at a forward price-to-earnings (P/E) ratio of just 11.8 for 2020, compared to the industry median of 16.4. If sales continue to outperform expectations, I don’t think it will be long before the group closes this valuation gap. 

Rupert Hargreaves owns no share mentioned.

Kevin Godbold: GlaxoSmithKline

In October, GlaxoSmithKline (LSE: GSK) reported sales growth across all its business divisions in the third quarter of its trading year. The guidance on full-year earnings rose from a decline to now being flat. That’s not spectacular, but it’s progress after a difficult few years driven by patent-expiry issues.

The R&D pipeline is contributing to rebuilding earnings and the dividend will be flat for the year. But the company hasn’t cut the payment in more than a decade and a half. I think GlaxoSmithKline looks solid, and the valuation could uprate to reflect progress, perhaps during December and beyond.

Kevin Godbold does not own shares in GlaxoSmithKline.

Edward Sheldon: Prudential 

My top stock for December is Prudential (LSE: PRU). At the time of writing, it trades on a forward-looking P/E ratio of just 8.6 and offers a prospective dividend yield of 3.3%. 

What I Iike about Prudential is that, following its recent demerger with M&G, it’s now predominantly focused on the savings and insurance needs of those in Asia. Given that wealth across Asia is rising at a rapid rate, while market penetration of financial products such as savings accounts and life insurance is still relatively low, I see considerable long-term growth potential here. 

With the stock a little out of favour right now due to US/China trade wars and political instability in Hong Kong, I believe it’s a great time to be building a position. 

Edward Sheldon owns shares in Prudential.

Tezcan Gecgil: Direct Line Insurance Group

On 20 November, Direct Line Insurance Group (LSE: DLG) announced its Q3 update. Management was encouraged that the motor insurance segment has been returning to modest growth, helped by improving market conditions. This improvement is an important reason why you may consider DLG for a long-term portfolio, especially if you are a contrarian investor. The level of car sales and thus the legally required motor insurance are correlated to the general health of the economy.

I expect to see an uptick in consumer confidence once the general election is behind us. Meanwhile, shareholders can enjoy a dividend yield of about 7.2%.

Tezcan Gecgil does not own shares in Direct Line Insurance Group.

Paul Summers: Carnival

My suggestion for December? Don’t try to make a quick profit from the election outcome and concentrate on buying resilient businesses that should do well regardless of who is in power.

One company I continue to build a position in is leading cruise operator Carnival (LSE: CCL). A price-to-earnings (P/E) ratio of 9 still feels too good to pass up considering its historic valuation and potential to tap into rapidly growing markets such as China.

I’m more than happy to wait for a recovery and pocket the secure-looking dividend (4.9%) in the meantime.

Paul Summers owns shares in Carnival.

G A Chester: Imperial Brands

I’m making Imperial Brands (LSE: IMB) my top buy for December, because it’s become one of the Footsie’s most unloved stocks. It’s lost about 60% of its value in recent years. Clearly, investors need to have two key things to buy into this stock: no ethical aversion to investing in tobacco, and a strong stomach for taking a contrarian position against the herd.

I think the rewards could be high. In my view, Imperial’s mid-single-digit P/E and double-digit dividend yield more than price in the well-known industry headwinds, and underestimate the company’s continuing pricing power, free cash flow generation, and scope to adapt and evolve over time.

G A Chester has no position in Imperial Brands.

Karl Loomes: Sirius Minerals

Not without some risks perhaps, but embattled miner Sirius Minerals (LSE: SXX) is starting to offer the potential for too large an upside to ignore, in my opinion. As I see it, there are three scenarios shareholders are likely to face – two of which should earn those who buy stock now money.

The first is that it effectively goes bust. In my eyes, an equally likely scenario – given the size of the deposit it sits on and the infrastructure already in place – is that it is either bought out or merged with another firm, and investors get some decent returns. The last scenario is that it manages to secure enough funding to keep it going, eventually moving into production and making very good money. This is the scenario that could make investors rich.

Karl has shares in Sirius Minerals.

Jonathan Smith: Greggs

Greggs (LSE: GRG) has already seen strong share price appreciation recently, up around 53% over the past 12 months. Year to date sales are up 13.4%, which impresses me even more considering how the high street has been struggling as a whole. 

Strong demand for innovative products such as the vegan sausage roll has enabled Greggs to differentiate itself from other bakers, and has enabled it to grow customer loyalty and good publicity.

I think this growth is only set to continue, especially if we see a boost to the domestic economy following the election and Brexit. 

Vegan mince pie anyone?

Jonathan Smith owns no share mentioned.

Kirsteen Mackay: Games Workshop

Games Workshop Group (LSE: GAW) saw a share price rise of over 30% in November.

Its cult brand, Warhammer, is a fantasy board game. Signing new animation licences has almost doubled royalty income, compared with a year ago, and profits are up.

2,000 UK schools have signed up to the Warhammer Alliance, which supplies students with equipment to get started in the hobby. Painting Warhammer models can help Scouts earn model-making badges and playing the game contributes to achieving the Duke of Edinburgh Award. The company has operations globally and a growing, loyal fanbase; its price-to-earnings ratio is 28, dividend yield is 2.4% and earnings per share are £2. I think there’s a lot to like.

Kirsteen Mackay owns no share mentioned.

Ambrose O’Callaghan: Pets at Home Group

My top stock for December is Pets at Home Group (LSE: PETS). The stock had climbed over 100% from the prior year as of close on 26 November.

Pets at Home posted an 18.9% year-on-year increase in profit before tax to £45m for the six months to 10 October. The company’s earnings were powered by retail revenue growth of 8%. Millennials have overtaken baby boomers as the biggest pet-owning generation, and this is fuelling huge sales growth in the pet retail market. This is an industry I’m excited about as we move into the next decade.

Investors will be paying a premium for Pets at Home Group’s growth as it possessed a price-to-earnings ratio of 35 at the time of this writing. However, it does offer a nice boon in the form of a 3.6% dividend yield. This is a stock I love for the long term.

Ambrose O’Callaghan has no position in Pets at Home Group.

Stepan Lavrouk: HSBC Holdings

Shares of British banking giant HSBC (LSE: HSBA) are currently trading around 580p a share, presenting a great opportunity for income investors to add this solid dividend payer to their retirement Stocks and Shares ISA.

The main attraction for me with this stock is its dividend yield – HSBC currently yields around 6.8%, which far outstrips the FTSE 100 average of 4.4%. What’s more, management has assured investors that they do not intend to cut the dividend for the full year.

For investors looking to make a play on the British financial sector, I believe that HSBC should be the clear favourite.

Stepan Lavrouk has no position in HSBC.

Tom Rodgers: Indivior

Opioid drug addiction treatment manufacturer Indivior (LSE: INDV) settled its legal woes this past summer and now its future now looks brighter than bright, in my opinion.

Investors can also pick up shares for a song: the firm is forecast to grow its earnings by more than 16% next year and I think it is hugely undervalued. City analysts agree with me, saying the INDV share price could be as much as 93% lower than its true value.

Return on equity is a whopping 84.5%, too. I say it’ll be a bumper year ahead for this stock. 

Tom Rodgers has no position in Indivior.

Peter Stephens: GlaxoSmithKline

With the world economy facing an uncertain outlook, defensive shares such as GlaxoSmithKline (LSE: GSK) could become increasingly sought-after by investors. The company’s financial performance is less dependent on the wider economy’s outlook than many of its FTSE 100 index peers. As such, it may offer relatively robust growth prospects in 2020.

GSK’s pivot towards pharmaceuticals could enhance its long-term growth prospects. Demand for medicines is likely to increase as a growing world population that is ageing may demand greater levels of healthcare. With a 4.5% yield, the stock seems to offer good value for money.

Peter Stephens owns shares in GlaxoSmithKline.

Manika Premsingh: The Sage Group

The FTSE 100 accounting software provider Sage Group (LSE: SGE) saw a share price dip when its latest results showed a hit to profits recently. But investors have been quick to shrug that off and the share price has quickly climbed back to pre-announcement levels.

The bounce-back is hardly surprising given the capital gains from the share. I first wrote about it a little over a year ago and from then to the last close, the share price has risen an unexpected 46%. It’s a good defensive share, which is expected to continue to deliver over time, even with short-term fluctuations as it continues to re-adjust its strategy. I’d be looking out for more of these dips in December.

Manika Premsingh has no position in The Sage Group.

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The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended Carnival, Hollywood Bowl, HSBC Holdings, Imperial Brands, Prudential, and Sage 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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