The UK stock market traded near record highs following December’s Conservative election win. But I think it’s fair to say there’s still a high level of uncertainty over the outlook for the economy and the potential impact of Brexit.
Despite this, I’m continuing to put money into the stock market. Returns on cash are so low that for long-term investors I think it makes sense to stay fully invested. In this article I’ll highlight five FTSE 350 stocks on my buy list at the moment.
Asia focus
After a tough few years, the outlook finally seems to be improving for Asia-focused bank Standard Chartered.
The bank’s profitability is improving and underlying pre-tax profit rose by 16% to $1.2bn in the third quarter of 2019. CEO Bill Winters reported growth in all parts of the business and across all regions.
Shareholders are starting to benefit — Standard Chartered bought back $1bn of shares during the third quarter, and the shares offer a forecast yield of 3.4% for 2020. I think there’s more to come and welcome the Asian exposure. I remain a buyer.
A good year for UK plc?
If you think that the UK economy is likely to remain strong in 2020, then FTSE 250 firm Howden Joinery Group might be worth considering.
This well-run business supplies kitchens to tradesmen, avoiding the costly overheads of selling to retail customers. Howden’s business model gives its depot managers plenty of freedom to maximise the profitability of their branches. The firm’s financial performance reflects this, with annual returns on capital employed of about 40%.
A slowdown in consumer spending is a risk, but performance remained strong last year. Although the stock looks pricey on nearly 20 times forecast earnings, I think that’s reasonable for such a profitable business.
Boring but essential
FTSE 100 packaging group Mondi makes a range of cardboard and plastic packaging products for industrial and consumer goods customers. The firm is aiming to improve the sustainability of its operations by developing paper-based replacements for some plastic items.
The packaging sector has been out of favour over the last year, but prices are starting to pick up now. I think it could be a good time to buy some shares in Mondi. The stock offers a 3.8% yield and looks affordably priced to me on less than 13 times 2020 forecast earnings.
Profit from volatile markets
We could see a spell of market volatility this year if global tensions continue to rise. One company that tends to perform well in uncertain markets is financial trading firm IG Group Holdings.
I see this firm as a kind of hedging policy. IG’s trading clients struggle in a flat market, but tend to perform well when markets are on the move. Despite regulatory headwinds, this remains a very profitable business. With a 6% dividend yield on offer, I’d keep buying.
Time for a holiday
Global demand for cruise ship holidays keeps rising. The biggest company in this sector, Carnival, recently said that bookings for 2020 suggest record levels of occupancy.
Rising costs are a potential concern, especially if oil prices spike higher. But City analysts expect modest profit growth in 2020 and believe the group’s dividend will be held. These forecasts price the stock on 11 times earnings, with a yield of 4.3%.
I’ve been buying in recent months, as I see this business as a long-term winner.
