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Top British stocks for May

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We asked our freelance writers to share the top British stocks they’d buy this May. Here’s what they chose:

Royston Wild: Angling Direct 

I’m expecting a sunny set of numbers when Angling Direct (LSE: ANG) releases its full-year financials on Tuesday, 11 May. I think the retailer’s share price — which is already up over 120% over the past year at the time of writing — could rise strongly again. 

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In its most recent update this penny stock said that it had retained “positive sales momentum,” and that revenues were tipped to have risen 27% in the 12 months to January 2021. Angling Direct has a history of lifting profits guidance in recent times thanks to strong progress on lifting margins and excellent sales via its online channel, too.

Beware, though, that Angling Direct trades on an elevated forward price-to-earnings (P/E) ratio of 50 times. This leaves the UK share in danger of a sharp share price reversal if sales growth shows signs of moderation. 

Royston Wild does not own shares in Angling Direct. 

Rupert Hargreaves: IP

IP (LSE: IPO) develops intellectual property-based businesses like Oxford Nanopore Technologies. IP owns 15% of this business valued at £340m. The ultimate sale price could be significantly lower or higher when it IPOs later in 2020.

I think the best way to look at the business is to consider its book value growth as a measure of wealth creation. Book value has grown at a compound annual rate of 11.3% since 2015. 

As the company gears up for the Oxford float, I think its stock could be worth buying, although if the float flops, IP could be left nursing large losses.

Rupert Hargreaves does not own shares in IP.

Dan Peeke: Diageo

With the hospitality sector reopening, alcoholic drinks company Diageo (LSE:DGE) is my top stock for May.

In short, after months without the pub, Brits are going to treat themselves. Diageo owns an incredible portfolio of premium brands – from Guinness to Tanqueray to Johnnie Walker – that are all going to be in high demand. Its share price had already risen by 10% in the first four publess months of 2021, so with sales increasing, its growth should be even more pronounced.

Of course, there’s always the chance that reopening venues is a disaster that reignites the pandemic and sends Diageo’s sales back down… but I’m feeling confident at the moment.

Dan Peeke owns shares in Diageo.

Paul Summers: Burberry

The share price of luxury firm Burberry (LSE: BRBY) has recovered fairly well over the last year as normality has returned to its key Asian markets. Even so, it’s still 10% below the highs hit in early-2020 (at the time of writing). 

Back in March, the blue-chip company revealed that revenue and adjusted operating profit would now likely be “ahead of consensus expectations”. Should this be confirmed in May and accompanied by a positive outlook statement, I think there’s a good chance we will see this gap close. As the great unlock continues, I’m holding tight to my stock.

Paul Summers owns shares in Burberry.

Harshil Patel: Howden Joinery 

Howden Joinery (LSE:HWDN) is a leading manufacturer and supplier of fitted kitchens. It has steadily grown its earnings over several years and could be well placed to benefit from a rise in homebuying.  

Several schemes and incentives are supporting the UK residential property market. A new government-backed mortgage scheme will help home buyers with just a 5% deposit. Stamp duty incentives are also currently still in place. 

Overall, this quality consumer cyclical stock offers double-digit margins, earnings growth and return on capital. It’s also conservatively financed and trades at an undemanding valuation.  

Harshil Patel does not own shares in Howden Joinery.

Edward Sheldon: JD Sports Fashion

My top stock for May is JD Sports Fashion (LSE: JD).

The reason I like JD is that, right now, many consumers are cashed up after months of lockdown. I think JD could benefit in the months ahead as the global economy reopens and consumers head out to spend their savings. JD could do particularly well in the US (where it now generates over a third of sales) due to the fact that many US citizens have received stimulus cheques.  

JD can be a volatile stock at times, so it’s not going to be suitable for everyone. However, overall, I think the risk/reward proposition here is attractive.

Edward Sheldon owns shares in JD Sports Fashion.

Roland Head: ITV

Television group ITV (LSE: ITV) had a difficult year in 2020. But the group is already reporting an improved outlook for 2021. I expect this recovery to continue.

Although the company continues to face tough competition from big streaming services and the decline of broadcast television, I do not think that ITV’s share price reflects the potential value of its programme production business.

Analysts’ forecasts suggest earnings will rise steadily over the next couple of years. With the stock trading on 11 times 2021 forecast earnings and offering a 4.4% dividend yield, I continue to view ITV as a buy.

Roland Head owns shares in ITV.

Nadia Yaqub: Diageo

Lockdown restrictions are easing and as people start to socialise they are likely to eat and drink out. I think Diageo (LSE: DGE) is well placed to capitalise on this. The beverage company has a diversified portfolio of over 200 brands including Johnnie Walker and Smirnoff.

It derives a significant portion of its revenue from the emerging markets. Here, Diageo’s brands are seen as a symbol of status for the growing affluent class. I think this region has further growth potential. The shares also offer an attractive dividend yield of over 2%, which is covered by earnings.

Nadia Yaqub does not own shares in Diageo.

Kirsteen Mackay: Tate & Lyle 

FTSE 250 stock Tate & Lyle (LSE:TATE) is hoping to sell a controlling stake in its artificial sweeteners division to help streamline the company and futureproof its growth prospects. By retaining a minority stake it won’t entirely lose out if this arm continues to grow its profitability.

This division could potentially sell for £1.2bn, according to the Telegraph. The proceeds would be used to help Tate & Lyle reduce its debt pile and turn its attention to becoming more competitive in its higher margin food and drinks division.

I like the growth potential in this stock and its 3.6% dividend yield. 

Kirsteen owns shares in Tate & Lyle.

Zaven Boyrazian: Saga

Saga (LSE:SAGA) is a travel and insurance business. For years its share price has fallen due to mismanagement.

But in 2020, Saga’s original owner, Sir Roger De Haan, made a sudden return. He injected £100m into the business, replaced the old management team and is now restructuring the entire company.

Based on the most recent results, it looks like the new strategy is working. Advanced cruise bookings for 2021-2023 increased by 20% despite the disruptions from Covid-19. And the insurance division finally started growing again.

There are plenty of risks and challenges ahead. But I believe Saga is capable of making a comeback over the long term. And so, I’m considering adding it to my portfolio while it’s still cheap.

Zaven Boyrazian does not own shares in Saga.

Christopher Ruane: C&C Group

C&C Group (LSE: CCR) is the drinks company that owns famous brands such as Magners and Tennent’s Lager. It has been hit hard by the pandemic.

While supermarket sales have held up well, the pub business has suffered badly. C&C also owns a drinks wholesaler and part of a pub chain. While there is a risk patrons won’t frequent pubs as much as they did before the pandemic, the reopening of many pubs across the UK still bodes well for its prospects in my opinion.

Christopher Ruane owns shares in C&C Group.

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