The Motley Fool

Top shares for April

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We asked our writers to share their top stock picks for the month of April, and this is what they had to say:

Rupert Hargreaves: Evraz

After falling to a low of 60p at the beginning of 2016, shares in steel producer Evraz (LSE: EVR) have since risen by more than 600% excluding dividends. And even after this growth, I believe the shares still look undervalued.

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Indeed, City analysts are expecting the company’s earnings per share to jump 31% to $0.84 (60p) in 2018 and on this basis, the stock is currently trading at a forward P/E of 7.8 compared to the broader market’s multiple of 14. Additionally, the steel producer is expected to pay out $0.43 (30p) per share in dividends for 2018, giving a dividend yield of 7%. In other words, if you are looking for a dirt cheap dividend growth stock, Evraz should be on your radar.

Rupert does not own shares in Evraz.

Royston Wild: ASOS

With half-year results just around the corner I reckon now could be a great time to pile into ASOS (LSE: ASC).

The online fashion retailer impressed investors back in January with news of a 30% retail sales improvement during September-December, which rose to £790.4m, as it continued to thrive amidst difficult conditions in its core UK marketplace, and revenues kept tearing higher in its overseas markets. And a similarly robust update on April 11 could well send its share price to fresh peaks.

City analysts are forecasting earnings growth of 26% and 24% in the years to August 2018 and 2019 respectively. It may be expensive, but I reckon ASOS’s stellar growth prospects make it worthy of a forward P/E ratio of 73.2 times.

Royston Wild does not own shares in ASOS.

Kevin Godbold: GlaxoSmithKline

Over the last year or so, investor sentiment has turned ugly towards those once-cherished firms we like to classify as ‘defensives’. Okay, they did get a bit pricey when interest rates were on the floor and economic uncertainty was the air we all breathed, but the correction has been brutal and valuations are looking fair at long last.

I think it’s dangerous to pick a firm based on valuation alone because share prices can overshoot on the downside. What’s needed is a combination of a basing formation on the chart, a reasonable valuation and decent forward prospects, so I pick pharmaceutical giant GlaxoSmithKline (LSE: GSK) to hold during April and beyond.

Kevin Godbold does not own shares in GlaxoSmithKline.

Ian Pierce: Greencore

My top pick this month is food-to-go manufacturer Greencore (LSE: GNC), which is now trading at under 9 times expected full year earnings and offers a 4.1% dividend yield. The company’s stock is so cheap because management disclosed last month that they expect 2018 earnings to be around 8% lower than last year.

But this isn’t the end of the world as the issues surround its tiny legacy US footprint. Management is taking the right steps to solve the underutilisation at these facilities and, with continued high-single digit growth in the UK and the addition of its newly acquired, larger US business that is trading well, I believe the future is bright for Greencore.

Ian Pierce owns shares of Greencore.

Edward Sheldon: Schroders (non-voting shares)

After a 15% share price correction in the last two months, I quite like the look of Schroders’ non-voting shares (LSE: SDRC) at present.

In March, the FTSE 100 investment manager reported a solid set of results, with profit before tax rising 23%. The company hiked its dividend by an impressive 23% to 113p per share – a signal of confidence from management.

Schroders has an excellent dividend-growth track record, and with the non-voting shares offering a yield of a mighty 5% at present with the payout being covered twice by earnings, I believe the shares represent a good pick for income investors right now.

Edward Sheldon has no position in Schroders.

Paul Summers: Superdry

Ongoing weakness in the share price of clothing retailer Superdry (LSE: SDRY) has presented a buying opportunity, in my opinion.  

Despite registering solid sales growth in its ecommerce and wholesale channels last Christmas, a lack of earnings upgrades combined with weak sentiment towards retailers since the start of 2018 has sent the stock on a downward trajectory.  

Nevertheless, with expectations lowered and shares trading on a more palatable valuation, I think Superdry warrants attention. Expect a bounce if May’s trading update allays investor concerns over the departure of co-founder Julian Dunkerton.

Paul Summers has no position in Superdry

Roland Head: Rio Tinto

Mining giant Rio Tinto (LSE: RIO) completed its planned exit from the coal industry in March, selling three Australian assets for a total of $4.15bn.

The group says that the move will allow it to focus on assets which can deliver “the highest returns”. Last year’s operating margin of 35% suggests this focus is already achieving results.

With net debt now down to $3.8bn, I expect some of the cash from coal sales to be returned to shareholders later this year. In the meantime, Rio stock trades on 11 times forecast earnings with a yield of more than 5%. I remain a buyer.

Roland Head owns shares of Rio Tinto.

Peter Stephens: ABF

While Associated British Foods (LSE: ABF) is a relatively diverse business which spans sectors such as ingredients, groceries and sugar, its key growth driver could prove to be retailing. Its Primark brand continues to grow in size and popularity. Since the real disposable income of UK shoppers is in decline, a growing number of shoppers may become increasingly price-conscious. This could lead to rising popularity for Primark’s value offering.

With ABF forecast to grow its earnings by 6% this year and 10% next year, the prospects for the business seem bright. Its diversity may also mean that its risk/reward ratio becomes even more favourable.

Peter Stephens has no position in ABF

Alan Oscroft: Next

The retail sector might not be at the top of many people’s stock-picking lists right now, but I reckon that makes it a great time to consider buying Next (LSE: NXT), which reported in March. Despite tough high-street conditions, Next beat expectations, seeing total revenue fall by only 0.5% and recording a modest 5.6% EPS drop.

If it’s cash cows you’re looking for, Next fits the bill, having returned £586m to shareholders during the year. That’s through a combination of share buybacks and dividends, with a special payment taking the latter to a yield of almost 7%. We should be in for a flat couple of years, but a P/E of 12 makes Next a buy for me.

Alan Oscroft has no position in Next.

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The Motley Fool UK owns shares of and has recommended ASOS, GlaxoSmithKline, and Greencore. The Motley Fool UK has recommended Associated British Foods, Schroders (Non-Voting), and Superdry. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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