Every month, we ask our freelance writer investors to share their top ideas for stocks to buy with investors — here’s what they said for July!
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What it does: Premier Foods manufactures a variety of branded and supermarket own-brand packaged food products.
By Stephen Wright. My top British stock for investors to buy in July is Premier Foods (LSE:PFD). I’ve been interested in this stock for a long time, but I think it might finally have reached a stage where I’d like to buy shares for my portfolio.
If you’ve ever heard that your branded custard and your supermarket-brand custard are from the same factory, this is true. And Premier Foods is the company that owns that factory.
I think that demand for this company’s products should remain stable, even in a recession. And the stock trades at a price-to-earnings (P/E) ratio of just under 13, which I think is reasonable.
To my mind, Premier Foods had always had too much debt and that’s stopped me from buying shares. However, with management having substantially reduced debt over the past few years, I’m looking at buying shares in July.
Stephen Wright does not own shares in Premier Foods.
What it does: Grainger is the largest residential landlord on the London Stock Exchange with a portfolio of around 10,000 homes.
By Royston Wild. In theory, residential landlords like Grainger (LSE: GRI) could suffer some turbulence as the economy sinks. As the employment market weakens, the chances of their tenants missing rent payments increases.
Recent data showing Britons drastically cutting food spending indicates the extreme financial pressures people are facing today.
Past events are not always an accurate indication of what’s to come. But encouragingly, history shows us that spending on accommodation by and large tends to remain stable during all points of the economic cycle. As a result, I think Grainger is an ideal stock for me to buy in July as the cost-of-living crisis worsens.
In fact, this is a property stock I’d buy to own for the long haul. The UK’s shortage of available rented homes looks set to drag on, meaning Grainger should continue to enjoy strong rental income growth.
Finally, I like the steps the business is taking to rapidly expand to supercharge profits growth. For instance, in late May it spent £128m to acquire another build-to-rent development in Bristol.
Royston Wild does not own shares in Grainger.
Associated British Foods
What it does: ABF owns fashion retailer Primark and a range of food businesses, including Kingsmill, Twinings and sugar producer AB Sugar.
Primark was hit hard by the pandemic because it doesn’t sell online. But the company’s value offering is chiming with consumers battling the cost-of-living crisis. Primark sales rose by 81% to £1.7bn during the 12 weeks to 28 May, compared to the same period last year.
Interestingly, Primark is now trialling a click-and-collect service. This could lead to a full online retail offer.
The main risks I can see relate to ABF’s food and agriculture businesses. With costs rising, I can imagine that profit margins could be squeezed by big buyers such as supermarkets.
However, ABF shares currently trade on around 12 times forecast earnings. I’ve rarely seen them so cheap. I think this could be a great long-term buying opportunity for my portfolio.
Roland Head does not own shares in Associated British Foods.
What it does: Reckitt is a consumer goods company that is focused on health, hygiene, and nutrition.
By Edward Sheldon, CFA. Given the amount of economic uncertainty we’re facing right now, I think it’s a good idea to buy more defensive dividend stocks for my portfolio. And one stock that fits the bill here is Reckitt (LSE: RKT).
Reckitt is certainly defensive in nature. Even in a recession, people are still going to buy its health products (e.g. Strepsils lozenges) if they fall ill. Meanwhile, it also has a nice dividend. At present, the prospective yield on offer is just under 3%.
Another attraction of Reckitt is that it’s currently benefiting from the infant formula shortage in the US. With a major rival recalling its products due to contamination fears, the company has been able to capture market share. This has boosted revenues on the nutrition side of the business.
Now, this stock does have an above-average valuation, which adds some risk. However, all things considered, I think it’s a smart buy for my portfolio in the current environment.
Edward Sheldon owns shares in Reckitt.
What it does: AstraZeneca is one of the largest biotech firms in the world focused on tackling cancer, respiratory, and cardiovascular diseases.
By Zaven Boyrazian. The biotech sector is fraught with enormous development challenges and financing risks. Yet, for the groups that succeed, humongous growth can be uncovered. That certainly seems to be the case for AstraZeneca (LSE:AZN) at the moment.
Despite being a giant “blue-chip” player in the space, shares have climbed by almost 30% year-to-date. The company has been delivering a slew of positive clinical trial results for several of its ongoing projects. But most notably is its phase 3 breast cancer treatment, Enhertu, which achieved a 49% reduction in disease progression versus traditional chemotherapy.
The drug is now being recommended for European approval by the Committee for Medicinal Products for Human Use (CHMP). And, if granted by regulators, it could untap a multi-billion-dollar market opportunity from just one of its products in the pipeline.
Pairing this exciting prospect with a diverse product pipeline and plenty of resources at its disposal makes AstraZeneca a business I’m considering for my portfolio today.
Zaven Boyrazian does not own shares in AstraZeneca.
What it does: Fresnillo is a miner and producer of precious metals, including gold and silver, and operates in Mexico.
By Andrew Woods. In 2021, Fresnillo (LSE:FRES) reported that profit before tax had increased by about 10.9%, while revenue grew by 11.2% over the same period. Much of this has been due to higher metal prices over the past couple of years.
While silver production remained flat last year, gold production fell by 2.4%. This decline may be offset in future by the opening of two new plants at Juanicipio and Pyrites. Both of these could bolster production in the years ahead.
In a wider sense, investors may flock to gold and silver to avoid inflationary risk. With inflation set to rise to 10% in 2022, this trend could mean that the value of Fresnillo’s produce increases over time.
There are risks, though. The company could begin to feel the pinch from higher energy costs. In addition, there is the challenge of workers’ potential wage inflation. Further regulations may also impact on operations, as could any pandemic resurgence.
Andrew Woods does not own shares in Fresnillo.
B&M European Value Retail SA
What it does: B&M is a discount retailer selling branded products to over four million customers a week.
By Paul Summers: Its share price has been struggling lately but I reckon discount retailer B&M European Value Retail SA (LSE: BME) is worth a closer look. With inflation likely to continue climbing over the summer, the company is well placed to benefit from an extended period of belt-tightening by UK consumers.
True, recent full-year results weren’t particularly well received. Revenue was down slightly on the previous year (but still way up compared to two years ago) and profit was flat. News that the CEO Simon Arora is to depart has also made investors nervous.
Still, I think a lot of bad news is now baked in. A P/E ratio of just over 10 at the time of writing looks reasonable. A 5% forecast dividend yield is chunky and looks very unlikely to be cut based on earnings expectations.
Paul Summers does not own shares in B&M European Value Retail SA
What it does: Rolls-Royce is a manufacturer of engines for commercial aircrafts, business aviation and military transport, as well as developing onsite power and propulsion systems.
What has sparked my interest was the recent civil aerospace investor day, which has led me to believe that there is light at the end of the tunnel.
Consistent investment over many years in its core markets of wide-body aircrafts and business aviation are starting to bear fruit. The business is now going through a period of less-intense new-product introductions, meaning that it will be able to capture a greater proportion of revenues through lucrative service contracts.
Another area that has seen explosive growth is in the passenger-to-freighter conversions. Rolls-Royce is primed to capitalise on this emerging trend. As supply chains have become increasingly constrained, companies have been looking for new ways to move their goods across the globe. The Trent 700 engines have a near complete monopoly in this space.
Exactly timing a likely recovery in the share price is impossible. But I am convinced that, long term, the trend will be higher.
Andrew Mackie does not own shares in Rolls-Royce.
British American Tobacco
What it does: British American Tobacco is a United Kingdom-based, multi-category consumer goods company that provides tobacco and nicotine products.
By Kevin Godbold. It’s hard for me to ignore the tempting numbers coming from British American Tobacco (LSE: BATS). With the share price near 3,560p, the forward-looking dividend yield for 2023 is just above 6.8%.
Annual dividend payments have been rising for several years. And they are backed by a robust flow of cash into the business. Meanwhile, elevating profits and a vibrant share buyback programme look set to drive earnings higher.
BATS is winning market share for its new products aimed at reducing some of the harmful effects of smoking. And losses have been reducing for the category. But the traditional smoking products are still a cash cow for the company despite a trend of declining worldwide volumes.
The industry faces intense regulatory scrutiny at times. And that could increase the risk for investors. But I’m holding the stock and believe it could do well in July and beyond.
Kevin Godbold owns shares in British American Tobacco.
What it does: Breedon is the UK’s largest independent construction materials firm. It produces cement, aggregates, asphalt, and other construction materials.
By John Choong. With the government recently announcing its new ‘Help to Build’ scheme, there are a number of stocks that could benefit from the initiative. One of which is AIM-listed, Breedon (LSE: BREE). A new house typically uses more than a 100 tonnes of cement and aggregates combined, on average. Therefore, new builds from the scheme should bring a tailwind to Breedon’s top line.
Breedon has multiple streams of income. The firm builds other infrastructure as well, such as roads, of which it has a sizeable contract surfacing and highway maintenance business. Additionally, the S&P Global/CIPS UK Construction PMI (a measure of how well the construction sector is doing) is still posting strong figures of growth.
So, with a P/E ratio of 13 and a forward P/E of 10, the stock definitely seems reasonably priced. Analysts have also given the stock an average price target of £1.00. As such, Breedon shareholders could potentially grow their money by 60%.
John Choong does not own shares in Breedon.
What it does: Unilever is a fast-moving consumer goods manufacturer that owns premium brands like Dove.
By Christopher Ruane. It has been a challenging year for consumer goods maker Unilever (LSE:ULVR). The company behind premium brands like Domestos and Lynx has been battling with rampant cost inflation. That threatens to eat into profit margins.
I think that helps explain why the Unilever share price has fallen by 13% over the past year. Investors are worried that inflation could hurt profits. In the short term, I think that is true. But I am a long-term investor, and reckon the current share price is a buying opportunity for my portfolio.
The sort of pricing power premium brands give a company can help it offset the challenge of inflation. So though Unilever’s volumes slipped 1% in the first quarter compared to the prior year, it still managed to grow sales by 7.3%. I think this resilient business model makes it an attractive buy for my portfolio at its current price.
Christopher Ruane owns shares in Unilever.