Every month, we ask our freelance writers to share their top ideas for value stocks with investors — here’s what they said for December!
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B&M European Value Retail
What it does: B&M operates a chain of discount retail stores selling groceries and general goods in the UK and France.
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By Roland Head. Profit growth has slowed at B&M European Value Retail (LSE: BME) since the pandemic. But the business is still expanding and is far more profitable than any of the big UK supermarkets.
Sales have risen by 70% to £5.6bn since 2019, while operating profits have climbed 78% to £568m over the same period.
Shareholders have benefited from a generous stream of dividends and these payouts are expected to continue. Consensus forecasts suggest a payout of 23.8p per share for the current year, giving a potential yield of 6.9%.
One risk is that long-time Trading Director Bobby Arora is set to retire next year. He’s the mastermind behind B&M’s ever-changing stock and keen pricing, but he’s leaving an experienced team behind. I don’t expect much to change.
B&M’s recent share price slide has left the stock trading on nine times forecast earnings. I think that looks cheap for a business of this quality.
Roland Head does not own shares in B&M European Value Retail.
Prudential
What it does: Prudential is an insurance and asset management company operating solely in Asia and Africa.
By Andrew Mackie. Buying something low and selling it for a profit in the years ahead sounds easy, and yet time after time too many private investors do the exact opposite. Take a company like Prudential (LSE: PRU). Off the back of a widespread narrative that China (its biggest market) has become “uninvestable”, its share price finds itself at levels not seen since 2012.
The Chinese economy may be in the doldrums, but the business posted a very respectable H1 results back in August. Its new business profit grew by 8%. This was all the more impressive given that during the same period in 2023, business was booming following the reopening of the border between Hong Kong and the Chinese mainland. Off the back of a solid set of results, its little wonder that it raised its dividend by 9%.
But it’s the long term growth story that I remain firmly focussed on. Single digit life insurance penetration rates as well as limited pension and health care provision, are unlikely to sit well with a growing middle class cohort.
Andrew Mackie owns shares in Prudential.
