I don’t need to tell you the performance of stock markets this year has been very different to last year! The FTSE 100 gained 12% in 2019, but is deep in the red in 2020. With the Covid-19 pandemic having changed the world dramatically, are my top share picks of last year still my best shares to buy now?
My best shares to buy
Gold miners Polymetal and four-times-tipped Centamin featured prominently among my picks. They did well in 2019, and I continued to rate them as buys going into 2020. They’ve thrived in this year’s turmoil. Polymetal’s up 28% since December, and Centamin 41%.
Despite the big price rises, their valuations remain attractive. This is because of substantial upgrades to their earnings forecasts. Polymetal’s forward P/E is 10.5 and Centamin’s 12.3. And with both stocks having prospective dividend yields of over 5%, they continue to look very buyable to me.
Another theme of my best shares to buy
I have a liking for ‘defensive’ stocks. And nothing pings my value antenna more than seeing a fundamentally sound defensive business in what I believe is temporary trouble. I tipped four stocks on this theme last year.
Domino’s Pizza and medical devices firm ConvaTec made very strong gains by the end of the year, and I rated them as holds by December. BAE Systems and twice-tipped tobacco group Imperial Brands put in less impressive performances. Patience is often required in these situations, and I continued to rate them as buys going into 2020.
Domino’s is up 22% since December, and ConvaTec up 5%. I’d continue to hold them today. BAE and Imperial are down 9% and 12% respectively. I still see these two as good buys for patient investors.
I wrote last year that after a 10-year bull market, I was generally wary of both ‘cheap’ cyclical stocks and many growth stocks that, to my eye, had become too richly valued.
I made an exception in the former category in tipping Barclays. It was simply too cheap to ignore, I felt. I also made an exception in the latter category in tipping National Express. I reckoned its P/E of 12 was undemanding. Both stocks made double-digit gains, but I saw them as still cheap enough to buy in December.
Barclays has since fallen 26% and National Express a whopping 49%. However, I maintain my view there’s considerable value in these businesses for investors. As such, I reckon they’re very buyable today.
Finally, after the 10-year bull-run, I was becoming increasingly interested in companies I felt could unlock value for shareholders with a major de-merger or sale of part of their business. Engineering conglomerate Smiths Group, which was planning a de-merger of its large medical division, particularly caught my eye.
The share price was little changed by December, and I continued to see Smiths as a buy going into 2020. The shares are now down 15%, the de-merger I need hardly say is currently on hold, but I still see ultimate value-unlocking potential here.
The Covid-19 pandemic has been an extraordinary event. However, in reviewing my best shares to buy of 2019 I’m not altogether surprised to feel much the same way about them today as I did before the pandemic. This is because at the Motley Fool we generally seek to identify businesses that can reward investors on a multi-year timescale.
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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays, Domino's Pizza, and Imperial Brands. 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.