Why I’d like to buy these 3 FTSE 100 and FTSE 250 shares in 2020

I believe these three FTSE 100 (INDEXFTSE:UKX) and FTSE 250 (INDEXFTSE:MCX) shares may be worthwhile investments in 2020.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

As 2019 winds down, year-to-date the FTSE 100 and the FTSE 250 indices are up about 7.6% and 19.6% respectively. Similar broader markets gains have been achieved in many countries globally.

Trailing P/E ratios for both indices stand at 16.1 and 23.1 respectively. Many analysts are now debating whether the decade-long bull market may be on its final leg and these P/E ratios may indicate that the indices may be ready to take a breather.

Regardless of whether that happens, the stock market is home to many well-managed companies that have robust earnings. Today, I’d like to look at three companies that I believe deserve a closer look.

BAE Systems

My first pick is aerospace and defence contractor BAE Systems (LSE: BA). Year-to-date the stock is up almost 22%.

Management recently provided an upbeat trading update, mostly due to increases in UK defence spending and US military budgets. As a result, the FTSE 100 giant has built an impressive order backlog. Its major multi-year contracts in the US include the F-35 fighter and armoured multi-purpose vehicles.

The group is also increasing contracts among NATO countries, including the Netherlands and the Baltic states. In 2017, Qatar and BAE had signed an agreement for 24 Typhoon aircrafts. Management confirmed that the deal has now been accelerated.

I find the business to be well positioned for sales growth in the new year. The stock is currently trading on a forward P/E ratio of 12.2 and offering a dividend yield of nearly 4%. The next ex-dividend date will be in April.

Greencoat UK Wind

Renewable power investment trust Greencoat UK Wind (LSE: UKW) invests in operating onshore and offshore UK wind farms that are currently producing income.

Management has highlighted that “the revenue that operating wind farms receive in the UK is made up of a number of components, primarily from the sale of power produced and green benefits accredited”.

The FTSE 250 fund has been steadily growing its portfolio since its IPO in 2013 and we can expect management to weigh up and capitalise on a range of opportunities in 2020 too.

According to Renewable UK, the leading not-for-profit renewable energy trade association, renewables provide nearly a third of UK power and half of this is generated from wind energy. The world of energy is changing and this modern technology is becoming increasingly popular with the public.

Year-to-date, UKWs shares are up about 18%. The current dividend yield stands at 4.6% and the stock is expected to go ex-dividend in February.

Mitchells & Butlers

In 2019, shares of All Bar One to Harvester pubs group Mitchells & Butlers (LSE: MAB) are up an eye-popping 70%. Yet the stock is currently trading at a forward P/E of only 11.5 and is likely to reach new highs in the year ahead. 

On 28 November, investors cheered  full-year results for the period ended 28 September. The FTSE 250 pub chain reported higher-than-expected full-year adjusted operating profit fuelled by stronger food sales. Full year revenue came at £2.2bn, up 4% year-on-year.

Management also succeeded in reducing net debt to £1.56bn from the £1.69b it was at  in FY2018 and improving the operating margin slightly to 14.2%.

Our readers may also be interested to know that the group is working with Just Eat and Deliveroo to improve utilisation of its kitchens that may have spare capacity.

Any downside? If you are an income investor, the group does not offer a dividend. 

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.

tezcang has no position in any of the shares mentioned. The Motley Fool UK has recommended Greencoat UK Wind. 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.

More on Investing Articles

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »