Every month, we ask our freelance writers to share their top ideas for shares to buy with investors — here’s what they said for September!
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What it does: Ashtead is an international equipment rental company operating in the UK, US and Canada with over 800,000 customers.
In June, the company posted an impressive set of full-year results that paint a picture of robust and growing end markets.
As a result, I think Ashtead’s share price has some serious upside potential in the medium- to long term. After all, the ongoing expansion into North America is clearly yielding results, as demonstrated by higher rates and volumes in the US and Canada.
Several catalysts for growth are evident in the region, including the onshoring of supply chains and governmental initiatives aimed at expanding infrastructure and fostering chip production.
It won’t be straightforward, though, as the group will have to navigate the challenge of increasing costs, which are affecting margin growth.
Nevertheless, I’m reassured by Ashtead’s robust market positions and brand power, both of which mean it’s well placed to be a key supplier for large-scale projects going forward.
Matthew Dumigan does not own shares in Ashtead.
What it does: Diploma distributes industrial components. It operates in three segments: controls, seals, and life sciences.
It’s rare that I look to buy shares when there’s momentum behind them, but I’m happy to make an exception here. My reasons are much more fundamental.
First and foremost, the company is growing at an impressive rate. Its revenue is increasing at over 20% per year, through a combination of acquisitions and organic growth.
On top of this, the company has a strong competitive position. Its focus on niche markets makes it hard for challengers to disrupt.
Growing by acquisition always brings a risk of overpaying. But Diploma has shown good discipline here and it continues to find opportunities.
To me, this looks like a great investment. Even with the stock up this year, it’s still top of my list of UK shares to buy.
Stephen Wright does not own shares in Diploma.
What it does: Kainos is a digitalisation expert enabling businesses to streamline operations, reduce costs, and improve customer experience.
By Zaven Boyrazian. With inflation and interest rates driving up costs, businesses are quickly becoming hellbent on reducing expenses. And that’s created quite a lucrative environment for digitalisation expert Kainos Group (LSE:KNOS).
The company identifies operational bottlenecks and finds technological solutions, saving its customers significant time and, more importantly, money. The firm is also a top-tier partner of Workday, helping firms integrate the human capital management platform into even the most complex corporate structures.
Despite being a relatively small enterprise, it’s been quietly working behind the scenes of some of the most prominent organisations in our everyday lives. In fact, the client list includes Netflix, Shopify, ASOS, and even the NHS.
The departure of CEO Brendan Mooney does introduce some uncertainty within the executive suite. Even more so, considering he’s been steering the ship for 22 years. But with successor Russel Sloan working his way up the ranks since 1999, I’m optimistic he can fill his shoes.
Zaven Boyrazian owns shares in Shopify.
What it does: Rolls-Royce makes and services aerospace engines. In addition, it offers defence and power solutions across air, sea and land.
Despite strong gains, I reckon it has much further to run. It’s part way through a multi-year transformation programme that has so far made excellent progress. This year, it swung into profit and cash flows improved.
Its relatively new CEO Tufan Erginbilgic has hit the ground running, making great strides with an ambitious profit-generating strategy.
Rolls-Royce makes a chunk of its sales from servicing plane engines. So a global post-pandemic return to air travel should continue to benefit this high margin part of the business. With engine flying hours at over 80% of 2019 levels, it’s heading in the right direction.
Managing its debt pile is a risk factor that I’d continue to keep an eye on. Despite making progress in reducing its borrowings, net debt stands at £2.8bn.
Overall, though, I’d say it’s a resilient and growing business that still offers excellent value.
Harshil Patel does not own shares in Rolls-Royce.