I think there may be a sustainable stock market rally coming next year. And if I had spare cash to invest I’d consider buying stocks such as these three now.
On 8 December, Mears (LSE: MER) released an upbeat trading update.
The company provides housing services, such as maintenance, management and care facilities. And there’s been “strong” trading since the summer prompting the directors to upgrade their expectations for revenues and profits.
The contract pipeline looks robust and the company has been seeing some success with recent bids. Indeed, City analysts have pencilled in an almost doubling of earnings for 2022 compared to the prior year.
Meanwhile, with the share price in the ballpark of 200p, the market capitalisation is around £214m making the business a small-cap enterprise. And that adds some risks for investors.
It’s also possible for Mears to have less bidding success ahead. However, I like the forecast dividend yield running just above 5% and the stock tempts me now.
Meanwhile, Vesuvius (LSE: VSVS) issued a trading statement on 15 November. The company specialises in molten metal flow engineering and technology. And it said the steel and foundry end-markets are continuing to weaken in the short term.
But the directors upgraded their expectations for the full year. And they said the trading strength arose because of “market share gains, dynamic price management, cost reduction actions and a more gradual unwind of inventory.”
For 2023, they said visibility is low and “the precise timing of a return to growth is very difficult to predict.” However, my takeaway is that the company expects growth ahead.
Meanwhile, with the share price around the 400p level, it’s down from its 2019 highs above 600p. And the stock has climbed back close to where it was a year ago putting the market capitalisation near £1bn.
City analysts forecast a dividend yield above 5%. Although earnings look set to decrease by around 14% for 2023. And it’s possible for a downturn in the company’s markets to increase in severity.
There are risks. But I’d be inclined to consider Vesuvius now to hold for the eventual recovery in its business and growth in the years ahead.
I’m also keen on sustainable packaging solutions provider DS Smith (LSE: SMDS). On 8 December, the company posted an impressive set of half-year results featuring strong growth in revenue and earnings.
Chief executive Miles Roberts said the outcome arose because of gains in market share driven by a “constant focus” on the evolving needs of customers.
Roberts expects the full-year performance to April 2023 to be ahead of previous expectations. And that’s despite the “challenging” macro-economic outlook.
City analysts have pencilled in a rise in earnings of just under 70% for the year followed by a flat outcome the year after. Meanwhile, with the share price near the 320p level, the forward-looking dividend yield is over 5%.
It’s possible for the business to experience a poorer result next year if economies weaken. And there’s a fair bit of competition in the sector. But I think the dividend from DS Smith is attractive. And the stock temps me now. So, I’d be inclined to embrace the risks and hold with an eye on the longer term.