Every month, we ask our freelance writers to share their top ideas for shares to buy with investors — here’s what they said for December!
[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]
Barclays
What it does: Barclays is one of the UK’s high street banks, and has international and corporate banking arms.
By Alan Oscroft. As we get towards the end of 2023, I think Barclays (LSE:BARC) looks a better and better buy.
The share price has dropped further, and we’re looking at a forecast price-to-earnings (P/E) ratio of under five now.
Talk of ‘higher for longer’ interest rates raises fears of high impairment charges for banks.
At Q3, Barclays’ impairments stood at £1.3bn year-to-date. But the £0.4bn added in the third quarter was less than I’d feared.
That has to be the main unknown going into 2024. But there’s international risk too.
Still the board reckons it should achieve a CET1 ratio of 13-14% this year. And I rate that as very strong in this climate.
Barclays has also recently completed a buyback, so I don’t see any real liquidity risk here. Oh, and I’ve seen no sign of pressure on the dividend so far, with a 5.5% yield on the cards.
Alan Oscroft has no position in Barclays shares.
Diageo
What it does: Diageo is an alcoholic drinks company. Its brands inclue Johnnie Walker, Tanqueray, and Guinness.
By Stephen Wright. Diageo (LSE:DGE) shares don’t get cheap often. Heading into December, though, the stock is at a 52-week low and down 24% since the start of the year.
The stock has been falling as a result of a weak trading forecast in Latin America, which is one of its largest markets. The risk for investors is that this might continue for some time.
Despite this, the company has some significant long-term advantages. These include leading brands in a number of categories and an ability to distribute at scale.
I think these should prevail over time and there’s therefore a real opportunity for investors at the moment. And I’m looking to add to the investment in the stock that I made recently.
The company’s growth isn’t likely to be spectacular, but I do think it’s likely to be steady. At a price-to-earnings (P/E) ratio below 17, the stock looks like good value to me.
Stephen Wright owns shares in Diageo.
Schroders
What it does: Schroders is an active investment manager that manages around £725bn of funds on behalf of private and institutional investors.
By Harvey Jones. September and October were volatile for markets but I’m an optimist and would rather pick stocks to take advantage of the next rally (whenever it arrives) rather than seek refuge in more defensive areas of the market.
As an investment manager, Schroders (LSE:SDR) acts as a geared play on the stock market. I would expect its shares to fall further when markets decline, and rise faster when they climb.
It has achieved the first of these two things. Over the last six months, the Schroders share price is down 24.39%, against a drop of just 6.07% on the FTSE 100. Over one year, Schroders is down 8.85% with the index up 3.97%.
Recent stock market falls have further eroded assets under management, which dropped £1.8bn in the last quarter to £724.3bn. There could be more to come, with markets under the cosh as inflation proves sticky and Israel fights Hamas.
Yet there is a growing sense that we have hit peak interest rates. The next question is when they start falling.
If I wait to buy Schroders until we know the answer, it will be too late. The early gains will already have been made.
I’d rather take a chance and buy at today’s low valuation of 11.9 times earnings, and pocket its juicy 5.86% yield. While I expect further market turbulence, I also hope to look back in a few years and think I picked a good time to buy Schroders while its shares were cheap and the yield high.
Harvey Jones does not own shares in Schroders.
