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2 of my top share picks for March and beyond

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Many value stocks previously damaged by the pandemic have burst into life. And I’ve been buying some of them. Here are two of my top share picks for March and beyond.

There could be pent-up demand ahead

FTSE AIM company Marshall Motor Holdings (LSE: MMH) delivered its full-year report today. The UK-focused vehicle dealer’s business is one of those affected by the lockdowns. And the figures for 2020 show reduced revenue and earnings. Although the modest double-digit percentage declines could have been worse.

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The vehicle sales sector has endured tough times. The company reckons 2020 marked the “fourth consecutive year” of declines in the UK new-vehicle market. However, “unforeseen” tailwinds and government support measures helped Marshall Motor deliver a reasonable trading outcome during the year. For example, sales continued as the firm adapted by using tactics such as click-and-collect retailing for new and used cars. 

Looking ahead, the company expects pent-up demand to boost sales when showrooms reopen. The government’s current roadmap date for that is 12 April. My guess is a backlog of customers could use some of the cash they’ve saved during the pandemic to buy new and used vehicles. And Marshall’s could see decent trading ahead. However, I could be wrong about that possibility.

Meanwhile, the share price has already recovered to its pre-pandemic level. And City analysts don’t expect fireworks ahead with the rate of earnings growth. Nevertheless, the company should restore dividends in 2021. And with the share price near 152p, the forward-looking yield is near 4%. And the anticipated earnings multiple is just over eight. I think the valuation is undemanding. And I’m tempted to buy a few shares to hold for the long term. However, the vehicle sales industry is cyclical and it’s possible a long-term investment may not provide the returns I’m hoping for. 

A quality operator

The FTSE 250‘s Ultra Electronics (LSE: ULE) delivered a robust full-year report today despite the pandemic. The business serves the defence, security, critical detection and control markets. Within those sectors, Ultra Electronics engineers solutions for mission-critical and intelligent systems. In 2020, the order book increased by 4% and revenue came in just over 4% higher than in 2019. The company managed to use that turnover to boost underlying earnings per share by just over 9%.

What appeals to me is the strength of trading through a difficult year. And the directors rewarded shareholders with a 5% increase in the total dividend. I think that move underlines their confidence in the outlook. With the order book at its highest-ever level, the company thinks it’s “well-positioned in key growth areas”. However, City analysts are only predicting a low single-digit increase in earnings this year. There isn’t much meat in that forecast and it would be easy to miss. If earnings do slip, we could see a decline in the share price ahead. And the company’s patchy record of earnings over the past few years is of some concern to me.

Nevertheless, I’m tempted to pick up a few shares to hold for the long-term potential. At 2,080p, the stock has a forward-looking earnings multiple of just under 16 for 2021 and the anticipated dividend yield is a little over 2.8%. That’s not a bargain-basement valuation, but the business scores well against various quality indicators, which encourages me.

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Kevin Godbold has no position in any share mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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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