1. Fuller Smith & Turner

Fuller Smith & Turner (LSE:FSTA) is a well-established UK pub and restaurant group, boasting over 200 establishments. The company also has a number of year-round sponsorships and ties with the football community. This makes it a great stock to invest in as the World Cup gains momentum.

The UK chain recently shared a positive set of half-year results. Additionally, it gave a generally positive outlook as it hopes to capitalise on the World Cup and Christmas season.

Nonetheless, its Q3 performance could hinge on England’s performance in Qatar. Getting to the latter stages of the tournament could result in more ‘casual’ fans taking a greater interest and boost its top line.

On the flip side, momentum could very quickly dissipate if England make an early exit. That being said, I’m bullish on England’s chances given how close they came last time. I think I could reap some benefits if I were to buy shares in one of the UK’s biggest pubs.

2. Diageo

Sticking with the theme of alcohol, Diageo (LSE: DGE) is another stock I’m keeping an eye on. The FTSE 100 firm is one of the world’s largest spirits company. As such, it stands to benefit from any increase in alcohol consumption associated with the World Cup as well.

With the UK, US, and various European countries sharing the stage at the World Cup, Diageo has a broad base of markets to reap rewards from. Moreover, its product portfolio, which ranges from Guinness and Johnnie Walker to Smirnoff, should see an uptick in demand as the tournament progresses.

The producer also announced robust sales growth in its most recent set of results. In fact, CEO Ivan Menezes expects its spirits to continue flying off the shelf despite the ongoing cost-of-living crisis. He forecasts consistent sales growth of 5% to 7% through to FY25.

This is in line with overall alcohol consumption over the past decade. These numbers aren’t stellar by any means. However, Diageo shares could also serve to protect my portfolio from downside risks during a recession.

3. Marks and Spencer

Unlike other grocers that have been reporting slower or declining sales growth, Marks and Spencer (LSE:MKS) has bucked the trend. This can partly be attributed to the Veblen effect — abnormal consumer behaviour caused by the belief that higher prices mean higher quality or value.

Furthermore, on its half-year earnings call, the UK supermarket said that it expects its customers to be spending more this year due to their more affluent backgrounds. Along with this, the FTSE 250 retailer has exclusive England-themed items for sale due to its partnership with the national team. All of these could mean better-than-expected sales for Marks and Spencer this quarter.

Nevertheless, I’m also aware of the potential headwinds surrounding the premium supermarket. These include elevated commodity costs eating into its bottom line and sky-high inflation impacting consumer basket sizes.

The post 3 UK shares that could benefit from the World Cup appeared first on The Motley Fool UK.

With restrictions seemingly a thing of the past as the world learns to live with Covid-19, I want to revisit some of these stocks. One I’m currently considering is Fuller Smith & Turner (LSE:FSTA). Should I buy the shares?

Pubs and hotels operator

As a quick introduction, Fuller is an operator of pubs and hotels in the UK. It operates via two segments which are Managed Pubs and Hotels, and Tenanted Inns. It manages and runs the former, while the latter is run by third parties under tenancy and lease agreements.

So what’s happening with Fuller shares currently? Well, as I write, they’re trading for 620p. At this time last year, the stock was trading for 823p, which is a 24% decline over a 12-month period. I believe Fuller shares have come under pressure due to macroeconomic factors, like many other FTSE stocks.

To buy or not to buy

So what are the pros and cons of buying Fuller shares for my holdings?

FOR: Fuller released full-year results in June for the year ending 31 March 2022. These results were positive and showed signs of life post-pandemic. Firstly, revenue increased from £73.2m in 2021, to £253.8m. Reopening helped this massively. Fuller also turned a profit in 2022, compared to a loss in 2021. Furthermore, it reinstated its dividend in 2022, which it had cut in 2021 to conserve cash. Finally, it wiped a chunk of debt off its balance sheet. Although trading has not reached pre-pandemic levels, I am buoyed by this resurgence, which could be the start of recovery and growth.

AGAINST: As noted above, macroeconomic headwinds could impact Fuller’s progress. Soaring inflation, the rising cost of materials, and the supply chain crisis could affect performance and investor returns. Rising costs could impact profit levels, which would in turn affect returns. Supply chain issues could also affect operations, which could affect performance levels as well.

FOR: The passive income from dividends is a major positive. At current levels, the dividend yield stands at 1.8%. This is a decent return for an AIM stock and close to the FTSE 250 average of under 2%. I am aware that dividends can be cancelled at any time, however.

AGAINST: At current levels, Fuller shares look expensive to me on a price-to-earnings ratio of 54. This makes me wonder if longer-term growth is already priced in. I will keep an eye on future updates, developments, and share price activity.

A FTSE stock I would buy

I must admit I am buoyed by Fuller’s recent update as well as the passive income opportunity. It could leverage positive performance into long-term growth too. With this in mind, I would be willing to add some shares to my holdings. I will keep an eye on the impact of macroeconomic issues, however.

The post Could this FTSE hospitality stock be primed for growth and returns? appeared first on The Motley Fool UK.

Paul Summers: Howden Joinery

Buying great stocks for the long term is the Foolish way, and I think kitchen supplier Howden Joinery (LSE: HWDN) is an ideal candidate for me. 

The company’s value has fallen back in 2022 so far and now offers an attractive entry point, considering its fat margins and strong brand. Next month’s FY21 results shouldn’t contain any nasties either. Pre-tax profit was already expected to be “at the top end of analyst forecasts” when Howden last reported in November. 

A P/E of 17 looks fair for such a quality business, even if trading could moderate slightly this year.

Paul Summers has no position in Howden Joinery

Royston Wild: Airtel Africa 

With fresh financials around the corner, I think now could be a great time for me to buy Airtel Africa (LSE: AAF) shares. Results for the nine months to December are scheduled for Friday 4 February.

A blend of low telecoms product penetration and soaring incomes in Airtel’s emerging markets is supercharging revenues. Indeed, latest trading news showed sales jump 27.6% between April and September. I’m expecting another blowout release in the coming days.

Airtel Africa’s share price has risen 93% over the past year, helped by a string of exceptional trading updates. Yet the telecoms business still trades on a forward PEG ratio well below the bargain benchmark of 1. I think it could be one of the best value shares for me to buy in February.

Royston Wild does not own shares in Airtel Africa.

Alan Oscroft: Unilever

Unilever (LSE: ULVR) hit the headlines in January with its failed £50bn bid for GlaxoSmithKline’s consumer products business. The share price fell, amid criticism from Terry Smith of Fundsmith, over the company’s record of mediocre returns.

Meanwhile, American activist investor Nelson Peltz has taken a stake. He has a history of triggering reforms at underperforming business, so can he do the same at Unilever? The company has already announced big cuts in its workforce.

A clash between investors and board could make this a risky and volatile period to invest in Unilever. For me, it’s a risk worth taking.

Alan Oscroft owns shares in Unilever

Andrew Mackie: Shell

I’m tipping shares in Shell (LSE: RDSB) as a top pick for me in February. The opportunity for oil and gas is potentially the best we have seen since the oil embargo of the 1970s. Years of under investment in the natural resources sector is coming home to roost. Software might be eating the world, but you can’t live on it!

Rising inflation is the catalyst for Shell’s near-term growth potential. Investors are waking up to the fact that fundamentals do matter, after all. Shell is making money hand over fist and paying down its debt.

In addition, it has set aside $7bn to accelerate share buy backs, thereby reducing the company’s dividend burden.

Andrew Mackie owns shares in Shell.

Rupert Hargreaves: Sage

Sage (LSE: SGE) is in the process of shifting from a software to a cloud-based subscription model. This process is taking longer and costing more than expected. If these challenges persist, the company’s profits could come under pressure. 

Even though it is encountering some bumps in the road, I think this is the right decision. The subscription model should yield a more predictable and repeatable income stream for the firm in the long run. 

As such, I would buy Sage for my portfolio today. 

Rupert Hargreaves does not own shares in Sage.

Zaven Boyrazian: Greggs

Greggs’ (LSE:GRG) shares have taken quite a tumble in the last few weeks. But despite this downward momentum, the food-on-the-go retailer continues to deliver impressive results.

The latest trading update did show a 3.3% drop in its two-year like-for-like sales. However, overall, revenue in 2021 still jumped by over 50% to £1.23bn — that’s even higher than pre-pandemic levels!

Supply chain disruptions and labour shortages continue to plague the economy. Greggs is obviously not immune to these disruptions. But given they are only short-term problems, I think the recent drop in price is an excellent buying opportunity for my portfolio.

Zaven Boyrazian does not own shares in Greggs.

Niki Jerath: Fuller, Smith & Turner 

It’s been a bumpy couple of years for pub and hotel group Fuller, Smith & Turner (LSE: FSTA); however, I think that from February trading should improve. 

As Covid restrictions are loosened, I expect office workers to return to the cities as well as an increase in tourism. Both of these should be positive for the firm. 

Though the stock is currently down 9% for the year, a recent positive trading statement from the company has already caused an uplift. While nothing is certain in investing, as the UK heads back to normality, I expect an increase in the share price in February. 

Niki Jerath does not own shares in Fuller Smith & Turner

Edward Sheldon: Experian

My top stock for February is credit data provider Experian (LSE: EXPN). Its share price has fallen during the recent tech sell-off and I think the FTSE 100 stock now offers a lot of value.

Experian recently posted a very solid trading update for the three-month period ended 31 December. For the period, revenue growth came in at 14%. Meanwhile, the group advised that it expects top-line growth of 16-17% for the year ending 31 March 2022. These numbers suggest that the company has momentum at present.

Of course, if tech stocks keep falling, Experian could underperform. However, with the stock now trading on a forward-looking P/E ratio of about 28, I think it looks attractive.

Edward Sheldon owns shares in Experian.

Roland Head: CMC Markets

Online financial trading group CMC Markets (LSE: CMCX) is my pick for February. I believe shares in the firm are likely to be undervalued at current levels, especially given plans to spin out the company’s UK stockbroking unit into a new company.

CMC shares have fallen by more than 40% over the last year as the pandemic trading boom has cooled. There’s a risk that profits will disappoint again, but I think that’s unlikely.

The stock currently trades on 10 times 2022/23 earnings and offer a forecast dividend yield of 5%. I’d be happy to buy CMC at this level.

Roland Head has no position in CMC Markets.

Andrew Woods: Hochschild Mining

Hochschild Mining (LSE:HOC), a stock that mines gold and silver, has endured a torrid past year in terms of its share price. In this time, it is down 45%. Of course, the stock is vulnerable to the movements of the underlying commodities to which it is exposed.

There are some reasons to be cheerful about Hochschild, though. With a much-improved cash position and its imminent acquisition of Amarillo Gold, the company is demonstrating controlled expansion.

With the silver price dipping below $23 per ounce, I think these shares could be a good buy for February.

Andrew Woods does not own shares in Hochschild Mining.

Christopher Ruane:  boohoo

It has been a challenging time for the online retailer boohoo (LSE: BOO). Investors have worried about criticisms of working conditions in the company’s supply chain. A longer-term financial challenge is increased supply chain costs, which threaten profitability.

I think the risks are already factored into the boohoo share price, which has crashed 70% over the past year. The company continues to grow revenues strongly. I believe it can address its rising supply chain costs. At its current price, I would consider buying boohoo for my portfolio.

Christopher Ruane does not own shares in boohoo.

Andy Ross: Polymetal International 

The highly probable ongoing rotation into value shares, and away from US and UK speculative and highly valued shares, makes me think that a high-quality cheap stock such as Polymetal International (LSE: POLY) could be a winner in February.  

With a P/E of six, the shares are undoubtedly very cheap. There are only a small number of other FTSE 350 companies with valuations at such a low level.  

It is a bit of a contrarian buy. Momentum investors won’t like the chart, but for long-term investors, it has good mining assets and makes a lot of cash. A rotation towards value could reverse the fortunes of the share price.  

Andy Ross does not own shares in Polymetal International.  

The post Best British shares for February appeared first on The Motley Fool UK.

The three companies I’ve got my eye on right now had bright growth prospects before the pandemic struck. They’ve been battered by lockdowns. However, I think they’re strong businesses and are soundly positioned for recovery in a full reopening of the economy.

My stocks to buy list

Cinema company Everyman Media Group (LSE: EMAN) suffered severe disruption in 2020. It saw just 10 weeks of normal trading conditions against 17 weeks of restricted trading and 25 weeks of full closure. Much of the first half of 2021 has been a washout too.

Thanks to vaccines and the UK’s roadmap out of lockdown, EMAN shares have risen from their lows of last year. Nevertheless, the business is still priced at a discount to its pre-pandemic value. Clearly, there’s a near-term risk the stock’s recovery could stall if I were to buy now and we see a delay to the 21 June D-Day, or even renewed lockdowns or restrictions. Beyond this, there’s competition from other cinemas and streaming services like Netflix.

However, I think Everyman can thrive due to its differentiated premium offering. It has atmospheric venues, and quality food and drink. And its programme of content ranges from mainstream and independent films to theatre and live concert streams.

Another premium leisure brand

Fuller, Smith & Turner (LSE: FSTA) also ranks highly on my list of stocks to buy in June. As you’d expect, this premium pubs and hotels group is another business that’s been hit hard by the pandemic. Its pubs were open on only 27% of the 388 days between 20 March 2020 and 12 April 2021.

As with EMAN — and also with my third stock to buy in June — FSTA shares have risen from their lows of last year, but remain at a discount to their pre-pandemic value. Like the cinema chain, the recovery of the FSTA share price could stall in the event of renewed lockdowns or restrictions. Also, with its significant focus on London, Fullers could potentially be held back by a slow return of tourists to the capital and workers to city offices.

On balance though, I reckon Fullers’ well-invested estate and ownership of some of London’s most iconic pubs should serve it well.

My travel stock to buy

Travel is another sector that’s endured a severe adverse impact from the pandemic. But National Express (LSE: NEX) is one stock in the sector I’m keen on right now. Like Everyman and Fullers, National Express has strengthened its balance sheet with an equity fundraising and secured additional liquidity from supportive lenders.

Nevertheless, the NEX share price could suffer should there be a slower-than-expected full reopening of the economy. Beyond this, the company also faces the challenge of moving to a fully zero-emissions fleet for a cleaner and greener future.

However, with its scale and good history of innovation, I think it’s well placed to meet the challenge. As such, NEX also makes it onto my list of stocks to buy in June.

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Covid-19 vaccine: 3 top UK shares

Pubs are set to be one of the primary beneficiaries of a vaccine. The hospitality sector has been hit hard by the coronavirus crisis, and unfortunately, many pubs have already closed their doors forever.

However, pubco Fuller Smith & Turner (LSE: FSTA) stands head and shoulders above the competition, in my opinion. The company entered the crisis with a solid balance sheet. Net debt was around £20m compared to property assets of more than £600m. This has helped it weather the crisis. 

According to its recent results, customers were quick to return to the firm’s establishments when they reopened over the summer. I reckon the same will happen after the second lockdown and in the new year.

While one might be able to achieve a higher return owning other UK shares, Fuller’s quick recovery last time and strong balance sheet have convinced me that this business can make it through the crisis in one piece and possibly emerge stronger on the other side. Other operations may not be so lucky. Those with a lot of debt and large rent obligations could struggle if sales do not bounce back and operating costs increase.

Growing oil demand

As the global economy recovers from the pandemic, oil and gas demand is expected to recover. I think this should help push the BP (LSE: BP) share price higher. 

This is one of the worst-performing UK shares in 2020. However, I believe that the worst is now behind the business. The price of oil has risen substantially in recent weeks. BP has also taken an axe to costs, pushing down its cost of production. 

As well as all of the above, the company has committed to invest billions in renewable energy over the next few years. This initiative should help the corporation reduce its dependence on hydrocarbons going forward. 

With a mid-single-digit dividend yield on offer as well, I think it’s possible this company could produce high total returns for my portfolio in the years ahead. 

Global diversification

Cruise ship operator Carnival (LSE: CCL) has suffered more than many other UK shares over the past nine months. Luckily, investors have been happy to support the enterprise. The group has raised billions of dollars in debt and new cash to keep the lights on throughout the crisis. 

With the light starting to show at the end of the tunnel, Carnival can now consider how it’s going to move forward. All indicators suggest customers will return. Bookings have surged since the Covid-19 vaccine news was announced. 

As such, I’d consider buying the stock at current levels. The firm is past the worst. It hasn’t collapsed, and customers are thinking of returning. While it could be some time before activity returns to 2019 levels, Carnival looks cheap compared to history. Like other badly effected UK shares, I think there’s a strong chance the stock could rebound in the short term as investor sentiment improves. 

The post Covid-19 vaccine: 3 top UK shares I’d buy right now appeared first on The Motley Fool UK.

They’re a diverse bunch, being an agriculture and engineering group, a media firm, and a pubs and hotels company. But I see all three as high-calibre enterprises, currently offering great value for long-term investors.

A resilient small-cap stock

Down 11% year-to-date, Carr’s Group (LSE: CARR) shares haven’t been as badly hit as many small-cap stocks. This is no surprise after a trading update last month. It said: “The group continues to trade through the Covid-19 pandemic with no material financial impact seen to date.”

Its agriculture division is performing ahead of expectations. Its engineering division has seen some temporary interruption to nuclear and defence projects, as well as an indirect impact from the weak oil price. Nevertheless, “overall trading remains in-line.”

In other good news, it said: “Cash levels [are] ahead of the board’s expectations.” Furthermore, it announced it will be paying its first interim dividend (deferred earlier this year) and a second interim payout.

At a share price of 137p, the running yield is 3.5%. The price-to-earnings (P/E) ratio for its current financial year is 12, falling to 10.8 next year. This is cheap for a resilient small-cap stock, in my opinion.

Good value for long-term growth and income

Publisher Bloomsbury (LSE: BMY), whose shares are down 29% year-to-date, issued a trading update last month. For the four months to 30 June, it said it had “experienced strong trading … with year-on-year sales growth of 18% during a period of unprecedented disruption caused by the coronavirus pandemic.”

At the height of lockdown, the company did an equity fundraising. It also decided to pay its final dividend as a bonus share issue. This will dilute earnings per share.

On the other hand, Bloomsbury has substantial cash. It has a successful track record of acquisitions and is considering opportunities. I reckon it could pick up good assets at cheap prices in the current environment.

At a share price of 207p, its forward P/E is 18.2 and its prospective dividend yield is 3.8%. I think we’re looking at a good-value stock for long-term growth and income.

Small-cap stock on the rocks

Shares of pubs and hotels group Fuller, Smith & Turner (LSE: FSTA) have been hardest hit of the three companies. They’re down 38% year-to-date. Of course, this has been one of the industries most severely impacted by Covid-19.

In its annual results last month, the company said it wouldn’t pay a final dividend. It’s a measure of the severity of the impact of the pandemic – but also the quality of Fuller’s underlying business – that this is the first time it has reduced its annual dividend in over 70 years.

More than 75% of its managed pubs and hotels, and almost all its tenanted inns, have now reopened. Nevertheless, we can write off the current year.

Looking ahead to next year, though, I reckon the shares are cheap at 600p. The P/E is 14.2 and the prospective dividend yield is 2.8%. This is another quality business to buy for the long term, in my book.

The post 3 UK small-cap stocks I’d buy today for the long term appeared first on The Motley Fool UK.

Regular Motley Fool readers will know I’ve been banging on for years in praise of the couple of dozen long-established family businesses listed on the UK stock market. Pubs group Fuller, Smith & Turner (LSE: FSTA), soft drinks firm Nichols (LSE: NICL), and lighting company FW Thorpe (LSE: TFW) are three such firms. Let me show you their blue-chip credentials, and why I’d be more than happy to buy them today.

Building long-term wealth

Strong balance sheets, and careful stewardship through multiple economic cycles and market crashes, are features of these businesses. I believe these qualities align well with the aims of investors seeking to steadily build wealth over the long term.

Furthermore, with a largely stable shareholder base of family members, and like-minded long-term investors, these companies’ share prices tend to hold up relatively well through the sort of market crash we’re currently experiencing.

The table below shows the performances of the FTSE 100, Fullers, Nichols, and Thorpe since markets went into free-fall after 21 February.

Seven decades of dividend growth

Fullers (founded 1845) owns premium pubs and hotels, as well as craft cider and gourmet pizza restaurant chain The Stable. As you can see, it’s outperformed the FTSE 100. This is despite it being in one of the sectors most heavily impacted by Covid-19 fears. For example, blue-chip Whitbread, the owner of Premier Inn — and food and drink chains, including Brewers Fayre — has seen its shares plummet 46%.

Fullers has a strong, freehold property-backed balance sheet. Furthermore, the sale of its brewing business last year, with cash proceeds of over £200m, now looks very timely. The company has a remarkable dividend record of seven decades of unbroken growth. The running yield of 3% and price-to-earnings (P/E) ratio of 14 indicate value against historical standards. And the same is true for Nichols and Thorpe.

Defensive out-performer

Nichols (founded 1908) owns a portfolio of still and carbonated drinks brands, headed by its flagship brand Vimto. The superior performance of its shares (-5%) versus the FTSE 100 reflects the defensive characteristics of the business. Having said that, it’s also outperformed Footsie drinks giant Diageo (-23%), which is widely seen as an exemplar of blue-chip quality.

Nichols’ latest annual results show cash of £40.9m on the balance sheet at the year-end, and no debt. The cash-adjusted P/E is 17 and the running dividend yield is 3%.

Another cash-rich small-cap stock

FW Thorpe (founded 1936) designs, manufactures and supplies professional lighting systems. It serves diverse industries and customers. Nevertheless, it’s more geared to the general economic backdrop than a company like Nichols. In other words, it’s a cyclical rather than defensive business. Yet its shares (-14%) have significantly outperformed not only the FTSE 100 during this market crash, but also classy blue-chip sector peer Halma (-19%).

Thorpe is another cash-rich family business. It had £30.8m on its balance sheet and no debt at its last year-end. The cash-adjusted P/E is 17.8 and the running dividend yield is 2%.

Hopefully, you can now see why I believe Fullers, Nichols and Thorpe deserve to be called blue-chip small-caps.

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Fuller, Smith & Turner (LSE: FSTA) might not be listed on Britain’s blue-chip index, though it’s one share I expect to also blast higher in the coming sessions. Not only could it gain on improving investor confidence, but the release of fresh trading numbers on January 30 could give it an added lift.

Is the share price about to bounce?

Shares in the pubs operator have remained largely range-bound during the past six weeks, finally consolidating after the heavy weakness that took it away from September’s record peaks of £12.30 per share. I’d argue that such heavy selling was unjustified given that Britons’ spending on leisure and entertainment activities, unlike that on retail goods remains strong, and that this should be reflected in Fuller, Smith & Turner’s upcoming financials.

New trading details from one of its sector rivals have certainly raised my hopes of a sunny release at the end of January. Back on the January 10, Mitchells & Butlers announced that sales have strengthened in recent months, with like-for-like revenues rising 3.5% in the 14 weeks to January 4. And it really blew the doors off over the holiday season, with underlying sales jumping 5.6% over the three-week period and total sales hitting all-time peaks on the five main festive days.

Reassuringly expensive

Fuller, Smith & Turner is no stranger to releasing solid statements of its own either. In last month’s update, the small-cap said that like-for-like sales were up a solid-if-unspectacular 2.1% in the first 36 weeks of the current fiscal year, reinforcing the notion that individuals can always find money for a pint, whatever the political and economic landscape.

City analysts expect earnings to drop 9% in the current fiscal year (to March 2020), though this is due to rises in business rates and wage costs. In fact, the Square Mile remains quite bubbly over the company’s longer-term sales picture, helped by the publican’s busy acquisition that which saw it take over Cotswold Inns & Hotels in the autumn to boost its presence in the heart of England. They predict therefore that profits will rebound 13% in fiscal 2021.

Fuller, Smith & Turner isn’t exactly cheap, its forward P/E ratio of 20.2 times flying above the benchmark of 15 that’s widely considered decent value. Though in anticipation of some robust trading numbers next week, and thus the possibility of some serious share price gains, I think the stock remains a top buy even at current prices.

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Royal Mail’s rise came on the back of news of a High Court ruling that a union postal ballot of employees for industrial action was unlawful. Fullers’ fall was down to it announcing that its central overheads this year will be materially higher than management previously expected.

Here, I’ll look at the immediate impacts on the two companies, and also give my views on the medium- and longer-term prospects for their businesses and investors.

Happy to buy

Fullers’ announcement on Friday stems from the £250m sale of its brewing business to Asahi earlier this year. There is a transitional services agreement (TSA), under which Fullers bears central overheads until May next year.

Clearly, management misjudged the costs, although it also told us costs have been adversely impacted by a migration to a new enterprise resource planning (ERP) system, which has not yet delivered the expected benefits.

As a result, the company expects pre-tax profit for its financial year ending 28 March 2020 to be in the region of £31m, broadly in line with the prior year on a comparable basis. My sums say earnings per share (EPS) will be around 46p, which gives a price-to-earnings (P/E) ratio of 21.3 at a current share price of 980p.

Fullers has a record of seven decades of unbroken annual dividend growth, and I can’t see it changing this year. A modest increase in the payout to, say, 20.25p would be well-covered by EPS, and give a yield of a bit above 2%.

Despite the company’s slip-up on central overheads – and another near-term headwind in the shape of industry-wide cost pressures – I believe the company’s medium- and longer-term future is bright. With its long history of prudent management, strong balance sheet, and well-invested estate, I’d be happy to buy the shares today.

Happy to avoid

Last week’s news that Royal Mail has managed to prevent a damaging December strike has certainly been welcomed by the market. It’s reckoned the company could get a £30m windfall from the general election, due to a big volume boost from electioneering mail and postal votes. And then, of course, there’s the crucial Christmas trading period.

However, the news also serves as a reminder that Royal Mail has a highly unionised workforce. Generally, I believe this tends to hamper flexibility, technological innovation, and the speed at which the company is able to implement change.

I’d anticipate another union ballot – and a strike – next year, leaving the company’s cost-saving target of up to £200m looking overly optimistic. But it’s the long-term impact of fraught management-union relations that concerns me.

And that’s not the only structural negative for the business and investors. Letter volumes are in long-term decline, as more customers and businesses migrate to digital communication. I see downside risk to the rate of attrition here.

The growing, but highly competitive parcels market isn’t sufficiently attractive to overlook the business’s structural issues, in my view. As such, despite a P/E of 10.2% and 6.5% dividend yield (at a share price of 231p), I see Royal Mail as a stock to avoid.

The post Will the Royal Mail share price ever get back to its 330p IPO price? appeared first on The Motley Fool UK.

The UK and Germany saw a contraction in GDP in the second quarter of this year, sparking fears both economies are on the brink of recession. This could play into the hands of what I consider two very strong businesses. Namely, Premier Inn owner Whitbread (LSE: WTB), a FTSE 100 giant, and Fuller, Smith & Turner (LSE: FSTA), a smaller-cap pubs and hotels group.

Fuller possibilities

Founded in 1845, and still a family-controlled business, Fuller, Smith & Turner is renowned for its prudent management, strong balance sheet and seven decades of unbroken annual dividend increases. At a current share price of 1,130p, its market capitalisation is £365m (or over £600m if we include two classes of share that aren’t traded on the stock market).

Earlier this year, it sold its beer business to global drinks group Asahi for £250m — a “substantial premium to the value attributable to the company’s shareholders if the beer business had remained under Fuller’s ownership.”

The board plans to distribute between £55m and £69m (100p to 125p a share) to shareholders, and I expect to hear more on this in an AGM statement next week. Chief executive Simon Emeny also impressed upon investors that the sale of the beer business has “the added advantage of putting us in a strong position to deal with potentially turbulent times ahead as the UK navigates the implications of exiting the European Union.”

He added: “I cannot think of a better time to be entering a transitional year, having bolstered the balance sheet and reduced our debt, putting our business in pole position to take advantage of attractive opportunities that arise.”

I think a rating of 18.5 times this year’s forecast earnings, represents good value for a company with its impressive history and in its current position. I’d be happy to buy the stock today and hold it for the long term.

Premier prospects

The same goes for £5.7bn-cap Footsie company Whitbread, whose £3.9bn disposal of Costa Coffee earlier this year puts it in a strong position to grow its Premier Inn business, not only in the UK, but also in Germany.

The German hotel market is a third larger than that of the UK, and even more fragmented. Small independent operators are suffering a structural decline to the benefit of branded hotels, and an economic slump could increase the pressure on smaller operators.

Whitbread is looking to accelerate growth in Germany, including by “acquisitions of small to medium existing hotel portfolios.” Indeed, it’s already announced an acquisition of 19 hotels from Foremost Hospitality Group, which is expected to complete in February 2020.

At a share price of 4,276p, Whitbread trades on 19.8 times this year’s forecast earnings. Again, I think this represents good long-term value for a strong business that’s positioned to take advantage of any attractive opportunities to accelerate growth, particularly in the German market where it’s at an early stage of expansion.

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