Investing alongside you, fellow Foolish investors, here’s a selection of shares that some of our contributors have been buying across the past month!
AppLovin
What it does: AppLovin is a technology company that helps app developers and publishers monetise their mobile applications.
By Dr James Fox. I bought shares in AppLovin (NASDAQ:APP) amid a recent dip. The US-based tech firm has seen its share price surge over the past 12 months – it’s up 173% already. However, that doesn’t stop it from having great metrics supporting the investment hypothesis.
For example, the company boasts forward EPS growth of 150% and aggregated medium term growth of 20% over a five year period. This makes it one of the most exciting stocks on the market.
The ad-tech company also trades at around 14 times forward earnings, putting it at a 30% discount to the sector average.
Resultantly, given the Palo-Alto-based firm’s positive growth trajectory, and relatively low P/E, it has a PEG ratio of 0.69 – a PEG below one normally suggests a stock is undervalued.
Despite its profitability, AppLovin is carrying net debt of $2.3bn, and that could be a concern for investors in this high interest rate environment. However, for me, the positives outweigh the negatives.
James Fox owns shares in AppLovin.
Games Workshop
What it does: Headquartered in Nottingham, Games Workshop manufactures miniature wargames such as its Warhammer franchise.
By Charlie Keough. I’ve long had Games Workshop (LSE: GAW) on my watchlist. And I recently decided to open a position.
There were a few reasons for this. I’m attracted to its dividend yield. Currently, this sits at 4.2%, topping the FTSE 250 average. The business only uses “truly surplus cash” to pay shareholders a dividend, meaning I’m confident of it paying out.
On top of that, its experienced monumental growth in the last decade or so. And its latest results were evidence of this. Core revenues jumped 14% during the three months to August. Licensing revenue also doubled to £6m.
The business will face challenges. Competition has begun to ramp up as names such as Disney enter the market. It’s also had to push up prices to combat rising costs.
However, with a loyal customer base, I’m not worried. Games Workshop is a well-run business with lots of potential for growth. For me, it was a no-brainer.
Charlie Keough owns shares in Games Workshop.
InterContinental Hotels
What it does: InterContinental Hotels is a hospitality company that owns many hotel brands including InterContinental, Kimpton, and Holiday Inn.
By Edward Sheldon, CFA. InterContinental Hotels (LSE: IHG) shares experienced a pullback earlier in the month and I bought the dip. I picked up shares at a price-to-earnings ratio of about 18, which I think is quite reasonable for this company.
What I like about InterContinental is that it owns hotel brands at both ends of the price spectrum. On the premium side, it owns the likes of InterContinental, Six Senses, and Regent. Meanwhile, on the cheaper side, it owns the likes of Holiday Inn and Holiday Inn Express. As a result of this diversification, it’s able to serve a wide range of travellers, from those with smaller budgets to those with cash to splash.
I also like its business model. Because it operates a franchise model, it’s able to generate a high return on capital.
Now, while spending on travel/hotels has been strong recently, there is no guarantee that this trend will continue. In the short term, a downturn in consumer spending does present a bit of a risk here.
However, in the long run, I expect this company to benefit from the retirement of the Baby Boomers (who love to travel) and rising global wealth.
Edward Sheldon owns shares in InterContinental Hotels.
Kainos Group
What it does: Kainos builds sticky relationships with other businesses, uncovering opportunities to streamline operations and improve efficiency.
By Zaven Boyrazian. Kainos Group (LSE:KNOS) is an evolving software services company that helps other businesses automate operations through digitalisation and the integration of the Workday platform. Earlier this month, shares took quite a tumble after sales from its healthcare customers were sliced by a third.
On the surface, it’s a troubling sign. But it’s a risk that management previously highlighted months ago. And ultimately, it seems to be a short-term problem, especially since the outlook for healthcare spending is set to improve in 2024 and beyond.
In the meantime, its Workday-focused divisions continue to expand at a rapid pace, offsetting the slowdown in the Digital Services division, pushing both the top and bottom lines to new record highs for the interim period.
Kainos shares still trade at a lofty premium even with the recent drop. And that paves the way for higher volatility. But such a price tag is justified in my mind, given the quality of the underlying business. That’s why I’ve already used the recent downturn as an opportunity to buy more shares in the company.
Zaven Boyrazian owns shares in Kainos Group.
Marks and Spencer
What it does: Marks and Spencer is a leading British retailer operating from over 1,400 stores together with a significant online presence.
By Andrew Mackie. The Marks and Spencer (LSE: MKS) share price has underperformed for well over a decade. As shopping habits changed, traditional high street retailers found it difficult to compete. Only a few years ago, it looked like it was heading in the same direction as the likes of Woolworths and Debenhams.
Today, its multi-year transformation strategy is really beginning to bear fruit. In its half-year results released last month, profits surged 84% on 2022. As free cash flow turned positive, this enabled it to restore its dividend for the first time in four years.
Of course, it does face a number of challenges. Consumers are being squeezed on a number of different fronts, not least a 20-year high in interest rates. However, what has really impressed me has been how effectively it has responded to changing habits.
For too long, M&S stores looked dated and cluttered. Not anymore. Its store modernisation has enabled it to attract new customers. With Christmas just around the corner, I am expecting its share price to continue to outperform. That is why I added some to my ISA portfolio in the last few weeks.
Andrew Mackie owns shares in Marks and Spencer.
Supermarket Income REIT
What it does: The firm owns and leases a portfolio of supermarket buildings. Its largest tenants are Tesco and Sainsbury’s.
By Stephen Wright. I’ve been buying shares in Supermarket Income REIT (LSE:SUPR) recently. The 7% dividend yield looks both attractive and reliable to me..
When it comes to real estate investment trusts (REITs) I look for three things. The first is a high occupancy rates, the second is reliable rent collection, and the third is scope for growth.
Supermarket Income REIT has all three, in my view. Its portfolio is fully occupied, though there is some risk that comes from 75% of the company’s rent coming from Tesco and Sainsbury.
Growth is probably the biggest challenge, but the firm’s rent contract have inflation-linked uplifts built in. This should provide some protection against rising prices going forward.
Since I bought the stock, the price has gone up a bit. I’d still buy the stock at these levels, but I’d be happier if it came back down a bit.
Stephen Wright owns shares in Supermarket Income REIT.
Unilever
What it does: Unilever is a global consumer goods group specialising in branded food and household products such as Domestos and Hellmann’s.
By Roland Head. I recently bought some more Unilever (LSE: ULVR) shares to add to my existing holding.
Unilever has a valuable range of brands and incredible global distribution reach, but I don’t think it’s been delivering on its potential in recent years.
A turnaround isn’t guaranteed, but I’m encouraged by the appointment of new chief executive Hein Schumacher.
Mr Schumacher has a good track record of delivering operational change and his early plans seem logical to me. I’m hopeful he’ll help to deliver some much-needed improvements in marketing and product innovation.
My main concern is that some of Unilever’s brands may not be as strong as they once were, especially in developed markets.
However, I’m encouraged by the longevity of this business, which hasn’t cut its dividend for over 50 years. I suspect Unilever will continue to adapt and evolve.
In the meantime, I’m happy to collect a useful 4% dividend yield from my shares.
Roland Head owns shares in Unilever.
