The FTSE 100 has had a strong start to the year, up around 5%. And as such, I’m on the lookout for FTSE 100 stocks I can buy this month.

Investors had a tough time in 2022 as the Russia-Ukraine conflict alongside red-hot inflation saw global markets take a hit. Yet despite this, the index flexed its strength, posting a slight gain for the year. In contrast, the S&P 500 saw a 20% fall.

Much of the same is expected in 2023. However, with the FTSE 100 posting a strong start, I have my eye on two stocks that I think would be solid additions to my portfolio. Let’s take a closer look.

Scottish Mortgage Investment Trust

The first on my list is Scottish Mortgage Investment Trust (LSE: SMT). Last year was a bleak time for growth stocks as investors shied away from these riskier investments. As a result, the Scottish Mortgage share price nosedived by 40%.

The trust has also got off to a slow start year to date, with its stock slightly down. However, I like the look of the Baillie Gifford fund as a long-term buy.

To start, as a retail investor, what I most like about Scottish Mortgage is the exposure I gain under one investment. The trust invests in over 100 companies, including unlisted firms, meaning I diversify my portfolio through owning it.

Scottish Mortgage is also currently trading at around a 15% discount to a net asset value of 835p per share, which signals that the fund is undervalued. This suggest that I can access its top holdings such as ASML and Tesla cheaper than their market rate. Clearly, this is a positive.

Despite this, it’s weighting to China has seen it underperform recently as the country has struggled with its ongoing battle with Covid-19. And on top of this, with interest rates set to be hiked further, the trust could take a hit given its focus on growth stocks.

However, with a long-term focus, and with the diversification it offers my portfolio, I like the look of Scottish Mortgage.

Next

Second on my list is retail giant Next (LSE: NXT). Unlike Scottish Mortgage, the stock has got off to a strong start in 2023, rising an impressive 15%.

One reason for this is that in January the business raised its pre-tax profit forecast by £20m to £860m. This was due to a rally in full-price sales in the nine weeks to the end of 2022.

The stock also looks cheap to me. It currently trades on a price-to-earnings ratio of 12. For a business of Next’s quality, I think this presents good value. Recently, it has also looked to expand, with its latest move being the acquisition of fashion company Joules.

The biggest threat for Next in the months ahead is rising costs and the potential for consumers to cut back on spending. However, as a strong brand with plenty of experience in the fashion retail industry, I’d be willing to snap up some Next shares.

The verdict

I don’t have the spare cash to buy these FTSE 100 stocks in March, otherwise, I’d be keen. Should this change in the near future, I’ll be looking to pick up both.

The post 2 cheap FTSE 100 stocks I’d be keen to snap up in March! appeared first on The Motley Fool UK.

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Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has recommended ASML and Tesla. 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.

The Next (LSE: NXT) share price held up well during the pandemic, despite the damage lockdown inflicted on the high street. It has found the cost-of-living crisis more of a challenge though.

Over the last 12 months, the Next share price has fallen 27%. Today though, it’s on a roll. The stock is up 15.71% in the last month.

The share price still tempts me

Next has been partly boosted by wider investor optimism, which has seen the FTSE 100 pick up generally. It has also been lifted by the feeling that, once again, it has the resilience to overcome current challenges.

Investors piled back into Next in the wake of last month’s positive full-year guidance, which suggested the stock was oversold. This showed full-price Q3 sales up 0.4% in the 13 weeks to 29 October, marginally beating expectations.

Next is now on course to deliver full-year pre-tax profit of £840m. That’s up 2.1% on the year, which I consider impressive, given the chaos out there. Earnings per share rose 4.5% to 554.5p. When temperatures dropped in early autumn, sales of woollies and winterwear jumped. The current cold snap should give it an even bigger boost.

Good companies often thrive in bad times. Next has been taking advantage of weakness elsewhere in the fashion industry, snapping up insolvent Joules for £34m in cash. It bought the Joules head office too, for £7m, also in cash.

That’s the advantage of running a tight ship, as Next does. It allows management to turn sector troubles to its advantage. It’s good news for Joules too, with founder Tom Joule retaining a 26% stake. And it is a huge relief for staff, with 1,450 jobs saved. There will also be synergies, as Joules will benefit from Next’s Total Platform infrastructure.

This is a FTSE 100 winner

Before that, Next bought Made.com out of administration for £3.4m. The group’s sheer scale should give the brand the stability it needs while also cutting supply chain costs. Once Next brings its retail skills to bear, both Joules and Made.com could thrive.

These are tough times for retailers as input costs rise, with heating and lighting brick & mortar stores an added burden. On the other hand, Next may benefit from the stronger pound, which could reduce the cost of imported materials.

Some of today’s concerns are in the price, with the Next share price hovering around 11 times earnings. Operating margins are a healthy 20.6%. It would be nice to see it fight back from current troubles, just as it fought back from Covid. Earnings per shares rocketed 138% in 2022 after stores reopened.

While the upcoming recession is set to drag on, it will end at some point. And Next looks in a better position than most to benefit when it does.

The stock currently yields 2.2%, covered 4.2 times earnings. My personal focus right now is on buying high-yielding dividend stocks. If I had more cash at my disposal today, I’d buy Next too. Can’t have everything, I’m afraid.

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Harvey Jones doesn’t hold any of the shares mentioned in this article. 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.

If I had as much as £10,000 to pump into a Stocks and Shares ISA right now I’d be looking to load up on top FTSE 100 dividend shares.

After years of trailing major indices such as the S&P 500, London’s blue-chip index is showing it’s made for tough times. US tech stocks may have cashed in on the cheap money era, but FTSE 100 shares now offer bruised investors a welcome safety net.

Investing goes in cycles and the tech splurge lasted beyond its natural term. That came as central bankers piled on the stimulus during the Covid crisis. Now investors are prioritising ‘value’ stocks, dividend-paying companies trading at low valuations. 

My ISA line-up

The FTSE 100 is full of them and I’d start by exploring these 10 companies. All have risks, but offer big opportunities too.

Insurer Aviva has delivered little share price growth in recent years. But it’s a dividend aristocrat paying income of 9.95%. Trading at a dirt-cheap 6.8 times earnings, it’s hard to resist.

Barclays is even cheaper at just 3.7 times earnings, while yielding 4.28%. Sticking with financials, I also like Lloyds Banking Group, cheap at 5.5 times earnings with a 4.82% yield (and future dividend growth).

The financials sector is being shaken by the gilt crisis, while rising interest rates could squeeze both small business and retail customers. But I reckon those risks are reflected in their rock-bottom valuations.

I’d also include transmissions giant National Grid. Frankly, this is a stock I’d buy at any time, as a core portfolio holding. Today it yields 5.77% and looks fair value at 14.4 times earnings. It’s a solid long-term buy and hold for my ISA.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Higher yields

With that as security, I’d take a bigger punt and buy a housebuilder such as Persimmon that yields a ridiculous 19.37%. Although I expect the dividend to be cut sooner rather than later, that won’t be a disaster given today’s starting point. House price crash fears are priced in at a valuation of 4.9 times earnings. At least, I hope they are.

Mining giant Rio Tinto is the second highest yielder on the FTSE 100 offering 14.21% and trading at 4.2 times earnings. Chinese demand for commodities is slowing and the dividend may be reduced at some point. Now still looks like a great entry point for contrarians like me. I’d also consider gold miner Fresnillo. It may benefit when inflation easies, the US dollar softens and the gold price recovers.

Clothing retailer Next will obviously suffer as discretionary consumer spending falls. But it looks better placed than most, and I’d consider it for my ISA too. Then I’d buy Unilever, because I’ve never seen it this cheap at 17.2 times earnings (it’s usually around 24 times) while yielding 4.42%.

Finally, I’d include spirits giant Diageo in my top 10. Yes, it looks expensive trading at 24.1 times earnings while the yield is just 2.08%.But it’s a solid, recession-proof business and they come at a premium in these troubled times.

The post How I’d invest £10k in a Stocks and Shares ISA today appeared first on The Motley Fool UK.

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Harvey Jones doesn’t hold any of the shares mentioned in this article. The Motley Fool UK has recommended Barclays, Diageo, Lloyds Banking Group and Unilever. 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.

I’m a huge fan of multi-channel clothing retailer Next (LSE: NXT) plc, which I believe offers great long-term dividend prospects, plus share price growth on top.

By rights, Next should have been savaged by the Covid pandemic and the shift to online shopping, the former having forced the closure of more than 8,700 non-essential UK stores in the first six months of last year alone, according to the Local Data Company.

I’d buy this top FTSE dividend stock today

But Next survived Covid and has turned the web to its advantage by developing a thriving online operation. Web sales supported margins during the pandemic, and now high street store sales are bouncing back.

In the year to January 2022, brand full-price sales jumped 12.8%, while profit before tax climbed 10% to £823m. It is worth noting that this is an increase of 140% since the pandemic-ravaged year of 2020/21.

Next did halt its dividend payments in the pandemic, but that was hardly surprising given the uncertainty at the time. It has since paid two special dividends, of 110p per share last September and 160p in January. 

I’m delighted to see that management plans to return to its pre-pandemic ordinary dividend cycle in the year ahead, starting with an ordinary dividend of 127p on 1 August.

Dividend cover remains health at 2.8 times, in line with the company’s long-standing policy, so it looks solid to me. The current dividend yield of 2.08% may be low, but I would expect that to rise over time, assuming trading gets back to normal.

As ever, there are risks. Retail remains a tough sector. New web threats will emerge. War in Ukraine has hit Next, forcing the closure of its websites there and in Russia.

Next offers share buybacks too

Lower overseas growth expectations also forced it to lower its sales guidance by £85m next year, and profit guidance by £10m.

Costs are expected to jump by over £140m, although the company expects to recoup almost £80m of that from savings. The Next share price has fallen by a quarter over the last six months, reflecting these uncertainties. 

Yet I think shareholders have been harsh on a really well-run company with strong dividend prospects, and I’m tempted by today’s entry P/E of just 11.36 times earnings.

Management has been extremely generous with shareholders, paying out the large majority of its excess profits in dividends.

Last year, Next generated £363m of surplus cash. In total, it returned £353m of that to shareholders, with special dividend payments totalling £344m and share buybacks adding another £9m.

That’s the spirit! AJ Bell calculates that Next paid out £2.3bn in dividends and £1.9bn in buybacks over the past decade. Investors often overlook buybacks but they have reduced the Next share count from 181m to around 127m, increasing the stake of loyal investors by almost a third.

So it’s not just a great dividend stock. It should give me growth as well.

The post I’d buy this top FTSE 100 dividend stock for long-term income and growth appeared first on The Motley Fool UK.

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Harvey Jones doesn’t hold any of the shares mentioned in this article. 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.

As an investor looking to build his wealth over decades, I’m naturally drawn to quality growth stocks to buy and hold. The lure gets even stronger whenever I’m given a chance to load up at reduced prices. With geopolitical tensions rising, I think we could be entering such a period now. 

With this in mind, here are three top-tier titans I’ve got my eye on. 

Croda International

Shares in chemicals firm Croda International (LSE: CRDA) are down almost 30% year-to-date. That’s an awfully big drop for such a great company. While I’m not sure I’d buy just yet, I do get the sense that opportunity is knocking increasingly loudly. 

For the uninitiated, Croda has been around for almost a century. It produces ingredients for manufacturers in the home care, beauty, personal care, and fragrance market. It also operates in the Life Sciences space (providing solutions to protect crops, for example). I can’t see either of these markets ceasing to exist, even if Croda has struggled to grow profits recently. 

On the downside, the shares still look highly valued at 28 times forecast earnings. That’s a bit higher than the company’s five-year average P/E. With investors showing a penchant for (possibly-lower-quality) stocks on cheaper valuations right now, I wouldn’t be surprised if there was more selling pressure ahead.

It’s a bit expensive for me at present, so it stays on my watchlist for now. 

Next

FTSE 100 clothing firm Next (LSE: NXT) is another company whose share price has been struggling. A 15% drop in 2022 so far leaves the stock sitting at a 52-week low and changing hands for just 12 times earnings. That’s a low valuation for a firm that has built a reputation for consistently great returns on capital and fat margins.

Then again, it’s worth considering the wider context. With higher prices pushing many in the UK to watch their non-essential spending, I wonder if things could get worse before they get better. Next month’s Q4 numbers will be pivotal in determining how much the business is suffering. Recent activity suggests investors are already bracing themselves for a few nasties.

Under the stewardship of Simon Wolfson, there’s no doubt in my mind that Next is one of the better companies in the FTSE 100. I’m also convinced it can and will bounce back from this sticky patch. 

Even so, I’m inclined to hold off buying for now. 

Auto Trader

A final FTSE 100 growth stock I’m keeping tabs on is Auto Trader (LSE: AUTO).

A beneficiary of the global shortage in semiconductors and, subsequently, new vehicles, buyers have been flocking to its site even more than usual. Indeed, the clamour for used motors sent the share price rocketing last November.

Unfortunately, the very same stock is down 14% year-to-date. Some profit-taking is understandable. Like Next, however, I wonder if demand could soften as inflation places huge pressure on discretionary incomes. That’s even if supply chain issues are resolved.

Having said this, a P/E of 25 is cheaper than digital peers such as Rightmove and considering its dominance of the industry in which it operates. As such, I’d be prepared to buy Auto Trader hand over fist if things get worse over the next few months. Just like this top investment trust.

The post 3 ‘no-brainer’ FTSE 100 growth stocks to buy if markets keep falling appeared first on The Motley Fool UK.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Auto Trader, Croda International, and Rightmove. 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.

The festive season has provided investors with some respite from what continues to be a tricky period for the UK market. However, it won’t be long before companies start releasing updates on trading. With this in mind, here are three stocks from the FTSE 100 that I’ll be keeping an eye on in January. 

Next

Fashion and lifestyle retailer Next (LSE: NXT) will be among the first companies to report to the market in 2022. A trading update, scheduled for 6 January, should serve as something of a bellwether for how well retailers have fared in the vitally important run-up to Christmas. 

Considering just how challenging 2021 has been for some businesses, Next investors have had a fairly decent year. Boosted by pent-up demand from shoppers, shares have climbed 15% in value and outperformed the FTSE 100. 

Whether this momentum has continued more recently is difficult to say. At 10%, full-price sales growth in Q4 is already expected to be lower than that seen in Q3. It could be even lower if the Omicron variant has succeeded in keeping people away from stores in December.

Still, Next doesn’t look overvalued to these eyes at just over 15 times earnings. That’s fairly average for its sector and pretty reasonable for such a quality company. On balance, I’m inclined to think there could be more upside ahead.

Tesco

Supermarket titan Tesco (LSE: TSCO) is another FTSE 100 company that’s down to report to the market and investors in early 2021 (13 January). Shares in the business are up 22% from where they started the year, far outpacing the index.

Recent research by Kantar suggests this rise isn’t unjustified. Tesco significantly outperformed its main rivals in the 12 weeks to 28 November. This resulted in a 0.7% gain in market share, taking its dominance back to a level not seen since February 2019. 

It’s not been plain sailing though. In addition to dealing with the ongoing disruption caused by the pandemic, Tesco has also faced a difficult run-up to Christmas with the threat of industrial action by workers at nine of its distribution centres. A strike was averted after the company agreed to a new pay deal. 

Tesco stock is currently trading for just under 14 times earnings. I’d be surprised if the company were able to replicate this year’s gains. Nonetheless, the 3.5% dividend yield should compensate for this.

Associated British Food

A final FTSE 100 I think is worth watching in the first month of 2022 is Primark-owner Associated British Foods (LSE: ABF). The company’s shares have done quite poorly in 2021, falling by almost 11%. 

This feels a little harsh, especially as ABF’s diversified business model arguably makes it more defensive compared to other retailers. Moreover, the company recently announced that trading had been ahead of expectations and like-for-like sales in Q4 were better than in the previous year. ABF also said it was managing to cope with supply chain issues to such an extent that pre-Christmas trading was unlikely to have been affected. 

Sure, the investment case isn’t bulletproof. Cost inflation could prove a near-term headwind. The seemingly perpetual pandemic could also have a few chapters left. The lack of online presence needs to be borne in mind too.

Even so, I think a P/E of 14 looks decent value for this top-tier stock. Anticipation of a positive trading update on 20 January could see the shares recover beforehand. 

The post 3 FTSE 100 shares I’ll be watching in January appeared first on The Motley Fool UK.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Associated British Foods and Tesco. 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.

Fast fashion multi-bagger

The penny stock in question is Sosander (LSE: SOS). Providing “a one-stop online shop for style-conscious women who have graduated from price-led alternatives”, the company also boasts brand partnerships with FTSE 100 firm Next, FTSE 250 member Marks & Spencer, and John Lewis. Just like the aforementioned Boohoo and ASOS, Sosander makes full use of data analysis to gauge which products it should prioritise and the best ways of reaching its target audience. 

Despite only being around since 2016, the company was listed on AIM only a year later. Performance since then has been somewhat erratic. For example, the share price went from 45p in September 2018 to just above 5p when the first UK lockdown was announced. However, anyone brave enough to buy this penny stock back when the chips were down will have done extremely well. Since March 2020, the valuation has climbed roughly 560%!

Based on today’s half-year numbers, I think there could be even more upside ahead.

Sales soar at this penny stock

At £12.2m, revenue rocketed no less than 184% in the six months to the end of September. To put this in perspective, that’s more than in the whole of the previous financial year. Gross profit came in at £6.9m — up more than 200% — and gross margin hit a superb 56.5%.

Other positives include the number of active customers over the six months soaring by 41% to over 191,000. This suggests that co-CEOs Ali Hall and Julie Lavington have got their marketing strategy spot on. 

Like many penny stocks, Sosander remains loss-making. However, an EBITDA (earnings before interest, tax, depreciation, and amortisation) loss of just under £1m is lower than the £1.02m seen last year. In other words, things are going in the right direction. In fact, the Wilmslow-based business revealed that it was EBITDA positive in both October and November as shoppers snapped up partywear, outerwear, and knitwear. 

No sure thing

Perhaps unsurprisingly, Sosander stated that it was trading ahead of current analyst expectations for the full year. Unfortunately, the share price is barely up as I type. I think this is most likely due to traders being caught off guard by suggestions that existing vaccines may not be all that effective against the new Covid-19 variant. On another day, the reaction might have been a lot different.

Even so, it’s worth bearing in mind that Sosander is hardly a risk-free proposition. Although the company had seen “no material impact” from supply chain disruption so far, things could easily get worse before they get better. I’m also minded to remember that, pandemic or not, the £75m cap operates in a highly competitive industry where, I imagine, brand loyalty is increasingly hard to secure.

My verdict

No one can say for sure what will happen next with Covid-19. As promising penny stocks go, however, this is definitely one I’ll be adding to my watchlist. If general market sentiment dips again over December, I may just need to make room for Sosander in my portfolio.

The post This penny stock is putting Boohoo and ASOS to shame! Time to buy? appeared first on The Motley Fool UK.

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Paul Summers owns shares in boohoo group. The Motley Fool UK has recommended ASOS and boohoo group. 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.

Profits jump

Fuelled by the recovery from the pandemic and a transformation plan, pre-tax profit and adjusting items came in at £269.4m over the 26 weeks to 2 October. That’s almost 53% up on that achieved over roughly the same period in the pre-pandemic 2019/20 financial year. It’s also above the £205m-£264m range predicted by analysts.

Although hard to ascertain whether growth was down to the company’s efforts to transform the business or the recovery in consumer spending following multiple lockdowns, food sales rose 10.4% over the period. Elsewhere, Marks’s long-derided Clothing and Home (C&H) division recorded a 17.3% rise in full-price sales and increased market share. No less than 34.4% of total sales from this part of Marks and Spencer now come from online.   

It gets better. Looking ahead, the retailer said that trading in the first four weeks of H2 had been “consistent with growth rates reported in Q2 and ahead of plan”. As a result, it expects recent demand “to be sustained in the near term” and is now targeting full-year pre-tax profit and adjusting items to be ahead of previous expectations at roughly £500m.

Contrarian pick

Today’s jump in the Marks and Spencer share price builds on the momentum seen over the last 12 months. In that time (and taking this morning’s move into account), the stock has climbed 87% in value. That’s an excellent result and provides evidence of how potentially lucrative contrarian investing can be.

Despite this recovery, MKS still traded on a valuation of 13 times earnings before traders sat down at their desks this morning. That looks fairly reasonable relative to industry peers. Next, for example, trades on 16 times forecast earnings and lacks Marks’s earnings diversification. It also looks reasonable considering the former’s plan to open 20 new stores and the progress made in reducing its debt pile. This now sits at £3.15bn, down from a little over £4bn in 2019/20.

Regardless of today’s move, the Marks and Spencer share price remains almost 30% below where it stood in 2016. To make matters worse, the company isn’t paying a dividend. Now, I’m more than willing to wait for a stock to recover. Even so, I would prefer to be receiving some form of compensation for my patience in the meantime. For me, this is easily one of the biggest issues with buying MKS stock now.

Unfortunately, the return of payouts looks some way off due to inflationary pressures. Throw in Covid-19-related obstacles, Brexit, supply chain concerns and old-fashioned competition and MKS is far from the home run today’s rise might suggest.

More upside ahead

Based on today’s report, however, it really does feel like this company is starting to get its mojo back. Assuming it has a positive festive period, I’m confident there’s more upside ahead for the Marks and Spencer share price.

Notwithstanding this, it’s clear that I shouldn’t get carried away given the multiple headwinds the company still faces. So, if I were to buy today, I’d definitely ensure that I was suitably diversified beforehand.

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Paul Summers has no position in any of the shares 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.

Online sales rocket

Let’s start with the good stuff. Full-price sales were up 17% in the 13 weeks to 30 October, compared to the same period in 2019. This brings growth in the year-to-date to 11.2%, compared to the year that preceded the pandemic.

Personally, I find this comparison far more helpful in judging Next’s performance. With its multiple lockdowns and forced store closures, 2020 was just too much of an anomaly.

As you would expect, Next’s digital offer continues to see strong momentum relative to its retail stores. Total online sales in Q3 were up 40% versus 2019/20 while the latter fell by just over 6%.

This difference becomes even starker when sales figures for 2021-to-date are highlighted. With just three months to go before the end of Next’s financial year, online sales are already up 49.5% on 2019/20. By sharp contrast, retail sales have plummeted 28.8%.

If this doesn’t show just how popular shopping from the sofa has become (and how important it is for any retailer to get their digital offering right), I don’t know what will. 

So why is the Next share price falling?

It seems to be down to the company’s cautious outlook. Today, Next said that it wasn’t expecting recent trading momentum to continue into Q4, even though sales in the last five weeks of Q3 rose 14%. This was a far better result than the 10% growth management had previously forecast.

In line with keeping its feet on the ground, the FTSE 100 constituent elected to keep guidance on full-price sales unchanged at 10.2% for November to January. It also raised guidance on full-year sales only very slightly. Pre-tax profit of £800m over the 12 months is still expected. That would be a 6.9% improvement on 2019/20.

Rather helpfully, Next provided a host of reasons to back up its projections. These include the possibility that demand will reduce now that people have already satisfied their post-lockdown spending desires. The inflationary environment — and the need for consumers to prioritise essential goods over discretionary spending — won’t help matters either.

Like many other businesses, Next also mentioned that stock availability “remains challenging” due to supply chain issues and labour shortages. Further investment in digital marketing is on the cards too. 

This all looks very prudent to me. I’d far rather a company under-promise and over-deliver (which Next has a tendency of doing). As updates go then, I don’t think there’s anything new for holders to worry about. The question is, are the shares good value?

Good value

Up 40% over the last 12 months, Next stock now trades on 16 times earnings. That doesn’t feel excessive, in my opinion. Then again, I suspect the reasons cited in today’s statement make it more important than ever to ensure that I am properly diversified if I were to begin building a position today.

I’d also need to be confident that the company can hold its own in the run-up to the festive period if the share price isn’t to lose steam early in 2022.

Considering the headwinds it has faced lately, Next continues to impress. As retailers go, I suspect there are far worse options out there. It’s a cautious ‘buy’, in my book.

The post The Next share price falls despite strong sales. Should I buy now? appeared first on The Motley Fool UK.

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Paul Summers has no position in any of the shares 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.

Despite the odd wobble along the way, the FTSE 100 is now up 19% in the last 12 months. Naturally, some of its constituents have done far better. Can this continue in September when results fly in thick and fast though? Here are three companies I’ll be keeping an eye on. 

JD Sports

Having climbed 41% over the last year, shares in sportswear retailer JD Sports (LSE: JD) are now well above their pre-Covid levels. It’s easy to see why. 

Back in July, the company said it had seen good post-lockdown trading. Business was particularly healthy in the US. As such, JD felt comfortable raising guidance on full-year pre-tax profit to “no less than £550m” from £475m-£500m previously. This would represent a 31% increase on that logged for 2020/21. 

Valuation-wise, JD shares trade on 26 times earnings. That’s lower than other shares in the FTSE 100. However, I don’t think it can even be described as cheap, particularly as margins in this business are very average. Overseas sales may also suffer if Covid-19 infections begin rising again. The possibility of brands such as Nike and Adidas trying to lure shoppers to their own sites is another threat.

Interim numbers arrive on 14 September. As good a company JD is, I’ll be watching next month rather than buying. 

Kingfisher

B&Q owner Kingfisher (LSE: KGF) reports half-year figures on 21 September. Unless something has gone seriously awry, these should be very robust. After all, UK lockdowns, a shift in working patterns, and a white-hot house market have all played into the company’s hands.  

A couple of months ago, KGF reported that it continued to see high levels and demand from new and existing customers. As a result, like-for-like sales growth for the first six months of the financial year would now be 22%, rather than “mid-to-high teens.“

Adjusted pre-tax profit would also be in the range of £645m-£660m — a healthy increase from the £580m-£600m previously predicted.  

The question however, is how long will the home improvement boom persist. Having spent so much time inside, I wonder if people will now be more concerned with going on holiday rather than taking on fresh DIY jobs. The arrival of colder weather could also put (external) projects on ice. Factor in tough comparatives and I’m wary of buying now.

Next

Retailer Next (LSE: NXT) is a final FTSE 100 stock I’ll be watching (but not buying) in September. Like the others, shares in the clothing and homewares top-tier titan have done well in the past year. A gain of 31% certainly isn’t to be sniffed at, especially as this still comfortably beats the index.

There’s little doubt in my mind that Next is a quality business. Last year aside, it’s long generated strong returns on capital and high margins. Led by Simon Wolfson, the management team is also top drawer.

Again however, the likely switch to ‘experience’ spending leads me to think that the Next share price may have peaked. Indeed, brokerage Credit Suisse recently said that it expects clothing sales to lag the more general retail revival in the rest of 2021.

Since I already have exposure to the clothing market via a certain AIM-listed giant, Next shares aren’t for me right now. However, I will certainly be scrutinising those half-year numbers when they hit the market on 29 September. 

The post 3 FTSE 100 stocks I’m watching in September appeared first on The Motley Fool UK.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Next. 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.