Today, I’m on the lookout for the best penny shares to buy. And I’ve come across three that City analysts expect to surge in value over the next 12 months.

Here’s why they’re worth serious consideration right now.

Watkin Jones

Watkin Jones (LSE:WJG) is a construction company specialising in build-to-rent homes, affordable housing, and student accommodation. Given the enormous (and growing) shortages in these property segments, the pricing outlook for the company remains highly favourable.

That’s not to say things are totally comfortable right now. Weakness in the UK economy and higher-than-usual interest rates have impacted trading recently. However, the likelihood of sustained rate cuts means sales volumes are tipped to pick up.

Watkin Jones has a strong balance sheet and a decent pipeline to capture these market improvements, too. It had net cash of £80m as of September.

The consensus among City analysts is the builder’s share price will almost double from current levels over the next 12 months, to 55.8p per share.

Premier Miton

Asset manager Premier Miton (LSE:PMI) is also vulnerable in this era of higher interest rates. It’s also a tiny player compared to some of the industry’s other firms, with less financial and brand clout.

Yet, like Watkin Jones, average share price forecasts for the next year are highly encouraging. A 33% rise to 74.2p per share is currently predicted, supported by expected interest rate reductions.

Premier Miton is embarking on widescale cost-cutting to support earnings and offset current market weakness, too. Last month it announced plans for £2m more worth of savings. It’s already achieved roughly £3m worth.

I think this penny stock could thrive over the long term as demographic changes drive investment services demand.

Michelmersh Brick

Michelmersh Brick (LSE:MBH) is highly exposed to interest rate changes and their effect on the housing market. Yet, the broad resilience of homes demand — and the possibility of a pick up when the Bank of England cuts rates — suggests things could be looking up for the building materials supplier.

City analysts broadly agree its share price should surge over the next year. A 59% rise, to 136.5p per share, is predicted. This would clearly take the company firmly out of penny share territory.

The UK’s growing population means a new housebuilding boom looks about to kick off. The government is planning 300,000 new homes each year until 2029.

Michelmersh has financial scope to raise capacity and make acquisitions to better seize this opportunity.

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It’s true that penny stocks are usually more volatile than multi-billion market cap firms. However, when I spotted that the Watkin Jones (LSE:WJG) share price fell by 32% on Wednesday (21 August), it still surprised me. The company has a market cap of £84m and a share price of 32.5p, so it technically is a penny stock. Here’s what happened.

Spooked shareholders

Before we get to the main driver behind the move, let’s quickly discuss the company. Watkin Jones is one of the UK’s leading residences for rent developers. The main focus is on the student accommodation and other affordable housing sectors.

Given that revenue for 2023 was £413.2m, it’s clear that this is a decent-sized company with weight behind it. Yet the sharp fall in the share price yesterday will likely leave some investors reeling for some time.

In a trading update, it commented that “market activity through the summer has been slower than
anticipated”. As a result, it doesn’t expect any large transactions to happen over the summer period. This means the firm has revised down expectations for operating profit. One broker that covers the stock, Progressive Equity Research, has revised down expected adjusted profit before tax from £11.5m to £7m for the year.

When we consider the extent of the hit this could mean for profits, the 32% drop does appear to make sense.

Weighing up both sides

Looking forward, I think things are finely balanced. On the one hand, the business flagged up that the lack of transactions this year will impact results in 2025. After all, lower sales now mean that those sites “will not contribute to revenue in future periods until they are forward sold”.

Therefore, the firm doesn’t expect operating profit for 2025 to be above the 2024 figure. This isn’t a great statement for investors who are considering buying the stock.

There are some reasons for optimism though. Interest rate cuts should make it easier and more financially profitable for the business to operate, given that the cost of funding and taking on new debt will be cheaper.

Further, there’s a continued shortage of rental and student properties, meaning there will be demand going forward. It’s not like the business is focusing on an area in the property market that’s really saturated.

Better options elsewhere

Based on the fact that the stock is down almost 5% today, it doesn’t look like the dip has been bought by value investors. It makes me cautious about buying, especially as the volatility with penny stocks can be high.

With my free cash, I feel there are plenty of better ideas out there right now. I don’t feel confident enough in the case for the Watkin Jones share price to recover quickly. On that basis, I’m staying away.

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Today I’m looking at three UK small-cap shares with forecast dividend yields over 8%. I think they’re all attractive investments with solid future prospects.

Buy the dip

My first choice is property developer Watkin Jones (LSE: WJG). This £270m business specialises in building purpose-built student property and build-to-rent apartments.

Unlike a typical housebuilder, this business doesn’t generally hold unsold property on its books. Instead, new projects are generally forward sold to buyers before they’re completed. This model reduces the financing risk taken by Watkin Jones and supports attractive profit margins.

Management say that the firm started its new financial year (on 1 October) with £270m of revenue already secured. That’s around six- or seven-months’ trading.

However, the firm’s profit margins are coming under pressure due to higher interest rates. What’s happened is that Watkin Jones’ buyers are facing higher borrowing costs. As a result, they’re pushing for slightly lower purchase prices.

Property market conditions could still get worse. But Watkin Jones’ share price has fallen by 50% since August and the firm has plenty of cash. The dividend looks safe to me, providing a forecast yield of 8.5% for 2022/23.

A household name

My next stock is more of a household name. Tile retailer Topps Tiles (LSE: TPT) recently reported record sales for the second year running. Adjusted pre-tax profit for the year ended 1 October climbed 4% to £15.6m, despite rising costs.

Topps’ share of the UK tile market rose to 19% last year. Average sales at each store are 25% higher than they were in 2019. Nearly two-thirds of sales are now made to trade customers.

This business looks in good shape to me. The main risk I can see is that in a prolonged recession, demand for home improvement would be likely to fall. That would probably hit sales.

Fortunately, there’s no sign of this yet. The company says that like-for-like sales rose by 3.4% between 2 October and 28 November, compared to the same period last year. City analysts expect a dividend of 3.6p per share for the year ending October 2023, giving Topps Tiles a forecast yield of 8.9%.

A niche investor

City of London Investment Group (LSE: CLIG) is a specialist asset manager that serves wealthy individuals in the US and institutional clients in the UK.

CLIG specialises in investment trusts and fixed income (bonds), with a focus on value strategies.

This business is highly profitable and consistently generates plenty of surplus cash each year. The main risk for investors is that it’s been very slow growing. CLIG’s share price of 418p at the time of writing is roughly the same as it was five years ago.

Despite this, shareholders have done well, thanks to generous and reliable dividends. I calculate that dividends received over the last five years would have provided a return of nearly 40% — all in cash.

At current levels, City of London shares offer a forecast yield of 8.3% for 2022/23. I think that looks safe and rate these shares as a good buy for income.

The post 3 ‘hidden’ high-yield stocks to buy in December appeared first on The Motley Fool UK.

A word of warning – AIM is more lightly regulated than the main market and also contains some high-risk speculative stocks. Careful research is needed to find the hidden gems, but I’ve found it’s worth the effort. Here are seven AIM market stocks that I’d consider buying for my portfolio today.

Safer profits from property

My first choice is AIM property developer Watkin Jones (LSE: WJG). This company specialises in building student accommodation and apartment blocks, which it then sells to big rental landlords. New buildings are often pre-sold before they’re built, so the risk of losing money on completed projects is low.

The main fear I have is that this business could face much tougher competition in the future. Purpose-built rental accommodation is a growing market with some big money behind it. But Watkin Jones is an established player with a good reputation. I think it should continue to do well.

The shares have slumped recently, and this stock now offers one of the higher dividend yields on the AIM market, at around 3.9%. I think Watkin Jones looks good value at current levels.

A potential bargain

My second pick is tableware and home fragrance group Portmeirion (LSE: PMP). This business grew out of a gift shop in North Wales, but today owns brands including Spode, Royal Worcester and Wax Lyrical.

One potential concern for me is that if it continues to buy up other businesses, Portmeirion could lose focus on its core pottery business. This still generates the majority of profits.

However, Portmeirion’s latest results suggest to me that this isn’t a problem yet. The group’s 2021 profits were only slightly below 2019 levels and City analysts expect profits to hit record highs this year.

The shares currently trade on just eight times earnings and offer a 4% dividend yield. I’m tempted to buy at current levels.

Promising newcomer

Franchise Brands (LSE: FRAN) only floated on AIM in 2016 but is growing fast and looks promising to me. This group owns a range of franchised businesses, including drain specialist Metro Rod.

Management recent expanded into the US with the acquisition of Filta, which provides commercial kitchen maintenance services through a franchise network in the UK and US.

Franchise Brands’ shares aren’t cheap, on 21 times 2022 forecast earnings. If growth slows, then the shares could fall sharply. But progress so far has been good, in my view.

Annual profit has risen from under £2m in 2017 to more than £5m last year. Franchise Brands is one AIM growth stock I’d consider buying for my portfolio.

Nuclear specialist

I normally avoid buying shares in building contractors. But I think that Renew Holdings is a bit different. This business specialises in essential infrastructure such as rail, water and nuclear energy.

Most of these areas are heavily regulated. Unlike housing and commercial property, they do not usually suffer from cyclical booms and busts. I’m particularly interested in the exposure to nuclear energy, which I think could be a growth area as the UK moves away from coal and gas.

Renew has delivered steady growth in recent years, with profits rising from £12m in 2017 to more than £30m last year. So far, management has been able to manage material shortages and rising costs without any impact on trading, we’re told.

If these problems continue, I think it might become more difficult for the company to manage them. That could cause profits to fall below expectations.

However, I’d see this as a short-term issue that would affect many competitors equally, so I’m not too worried. For now, I think Renew Holdings looks an interesting opportunity for continued growth.

A cash-backed 6% yield

Bank note authentication and brand protection specialist Spectra Systems has one of the highest dividend yields on AIM, at 6.4%.

This tempting payout looks fairly safe, in my view. Spectra has no debt and generates plenty of cash each year, thanks to its 35% operating profit margin. I think the main reason these shares don’t trade much higher is that the company’s growth rate has been fairly slow in recent years.

Investors worry that demand for bank notes and Spectra’s services could fall in future years. But there’s no sign of that this year and I think new products such as a machine-readable plastic banknote material could support long-term demand.

This is a niche business, but as an income investor I’m tempted to add a few to my portfolio.

Pharma growth

Healthcare is one of the long-term growth themes in my portfolio. One less well-known company in this sector is Alliance Pharma (LSE: APH).

Alliance specialises in buying mature consumer healthcare products and improving their distribution and marketing. The firm’s share price has doubled over the last five years.

This business may not sound that exciting, but profit margins have averaged over 20% since 2016 and sales have nearly doubled over this period.

I think management is a key risk here – misjudged future acquisitions could hit profits and damage the group’s growth record.

For now, though, I remain bullish about this company. I’d be happy to tuck a few shares away for the next five years.

25% growth forecast at this stock

My final pick is currency exchange specialist Argentex (LSE: AGFX). This small-cap specialises in providing foreign exchange services to corporate and private clients.

The business is led by founder and CEO Harry Adams, who has a 12% shareholding in the business. I reckon this should mean his interests are well-aligned with those of shareholders.

Perhaps the biggest risk I can see is that this is a fast-growing, competitive market. Will Argentex end up as a long-term winner or an also-ran?

I don’t know, but broker forecasts suggest it could report 25% earnings growth this year. Based on these estimates, I think the shares look very cheap on eight times forecast earnings. This AIM stock is on my list as a potential buy.

The post 7 top AIM market shares to buy now appeared first on The Motley Fool UK.

There’s been good news from property developer Watkin Jones (LSE: WJG) today in its full-year results report. Decent trading has enabled the firm to reinstate dividend payments, despite the ongoing pandemic. The share price shot higher in early trading. But it isn’t too late for me to add the stock to my portfolio.

Passive income from the dividend

With the share price near 205p, the forward-looking yield is just below 4% for the trading year to September. And I reckon there’s potential for shareholder payments to increase in the years ahead. The company said in the report the return to dividends was “driven by robust performance with foundations in place for future growth.”

Watkin Jones reckons it’s the UK’s “leading” developer and manager of residential property for rent. And it focuses on the build-to-rent (BtR) and purpose-built student accommodation (PBSA) sectors. As such, the stock will give me decent diversification between sub-sectors in the wider property arena. I’d consider buying it alongside other shares such as housebuilder Persimmon.

Richard Simpson, chief executive of Watkin Jones, said in the report operations performed well. And in the period, the company secured more sites to increase the development pipeline and position the business for further growth. 

Although the pandemic caused delays to investment activity, forward sales have picked up. And Simpson reckons the business will likely return to growth as early as during the current trading year. Although that outcome assumes there’ll be no further “significant disruption to our activities.” Overall, Simpson is “very confident” in the long-term prospects for the company’s markets. He said strong sector dynamics and investor demand support the business and its prospects.

Diversification between companies and sectors

I reckon Watkin Jones is worthy of my own thorough analysis and research right now with a view to buying the stock to hold for several years. I’d aim to compound gains by reinvesting dividend income along the way. But I wouldn’t stop with this stock or even with other shares in the wider property sector.

When it comes to building a reliable passive income, I think diversification between sectors and companies is desirable. And I’m particularly attracted to companies operating less-cyclical businesses. Such defensive outfits can often be found in sectors such as IT, Technology, Utilities, Power, Healthcare, Fast-moving Consumer goods and others.

So, I’d also look closely at big-yielding, cash-generating enterprises such as British American Tobacco, GlaxoSmithKline, National Grid, Severn Trent and Sage. Packing dividend yields into my portfolio from names like these will likely give me a decent passive income that’ll keep on giving for years to come.

The post How I’d start earning passive income with these stocks right now appeared first on The Motley Fool UK.

The state of the near-term yield isn’t the only reason why dividend chasers need to pay the construction giant close attention, though. Thanks to the rate at which Watkin Jones throws out cash, annual payouts have exploded in recent years and were up 15.2% in the last fiscal year alone.

And there’s plenty of reason to expect them to keep blooming, as recent trading details from the business this week showed.

Glad all over

The AIM-quoted company – which caters primarily to the student accommodation and buy-to-rent sectors – declared that “trading remained strong through the final quarter of the [fiscal] year” and that “all of the group’s business segments performed well and delivered on their operational objectives for the year.”

Watkin Jones has got the bit between its teeth and is making brilliant progress on all fronts. For the current financial year, all seven of its purpose-built student accommodation (PBSA) developments, totalling 2,603 beds, have been sold. Another 1,928 beds spanning four schemes have been offloaded for fiscal 2021. Meanwhile the business has 159 build-to-rent (BtR) flats forward-sold for the present period and another 782 for the next financial year.

And there could be much, much more to come. According to Watkin Jones, “a number of other PBSA and BtR opportunities [are] in advanced stages of negotiation,” the successful conclusion of which would add an extra 2,025 student beds and 1,150 BtR apartments to the pipeline for delivery in the two years from fiscal 2021.

Share price strength

No wonder, then, that City analysts are expecting Watkin Jones to keep growing earnings by a healthy rate over the near term at least, with an 11% bottom-line rise currently being predicted. And there’s two further reasons to cheer this perky prediction: it results in a cheap forward price-to-earnings ratio of 14.5 times. It also leads to those aforementioned expectations that dividends will keep growing at a healthy rate.

A predicted 8.1p per share reward for the year just passed is predicted to rise to 9p in fiscal 2020, up 11.1% year on year, and as I said, a forecast that creates a bulky near-4% yield. The mid-cap looks in great shape to meet this figure, too, what with dividend cover sitting bang on the broadly accepted safety benchmark of 2 times and cash flow remaining strong.

Watkin Jones’s share price has rocketed 15% in the past six months and is now dealing at two-year peaks around 240p, though given its exceptional trading momentum and its undemanding forward earnings multiple I believe there’s plenty of scope for it to keep rising.

For investors seeking hot profits and dividend growth at low cost I reckon it’s a brilliant share to buy today.

The post Forget Cash ISAs! A dividend growth stock I’d buy today and hold for 10 years appeared first on The Motley Fool UK.

Well don’t let that stop you. There’s still a wide range of top income shares that could still make you a mint in the near term and beyond. Take ContourGlobal (LSE: GLO), for example, whose role as owner and operator of electricity plants all over the world gives it terrific earnings visibility, not to mention predictable cash generation, even with an increasingly-troubled macroeconomic outlook.

Not that investors will likely have to wait long to ride the power play’s brilliant investment case, however. With profits predicted by City analysts to explode through to the close of next year, dividend yields are expected to keep rocketing too, resulting in monster dividend yields of 6.6% for 2019 and 7.2% for next year. And in the long term, ContourGlobal’s a great play on booming energy demand in the emerging markets of Africa and Latin America.

Dig this

I reckon Watkin Jones (LSE: WJG) is another great ISA pick for income hunters today.

It’s true that a 3.6% yield for the year to September 2020 sits some way below those of ContourGlobal, though this figure still smashes the rate of inflation in the UK right now. Besides, the rate at which the student accommodation provider has already hiked annual dividends in recent times (up 90% in the three years to 2018) still makes it worth sitting up to take notice of.

Watkin Jones is benefitting from booming enrolment in UK universities from both homegrown and overseas students, and the subsequent shortage of available accommodation for these students. The business has a bulging development pipeline (of 9,000 beds through to fiscal 2022) to exploit this fertile environment to the fullest. And so Watkin Jones (which saw adjusted pre-tax profits rise leap 10% in the first half of fiscal 2019) is in great shape to keep delivering brilliant returns up to the end of the 2020s at least.

Ace in the hole

If you’re seeking shares with bigger yields than the UK blue-chip average of 4.5% today, though, you might be happier to splash the cash on 888 Holdings (LSE: 888) instead. For 2019 and 2020, these clock in at 4.7% and 4.9% respectively.

And I’m confident that shareholder payouts should remain on the right side of generous as 888’s ambitious expansion strategy promises to deliver some powerful profits growth. This year the firm has launched into Sweden and Portugal while it’s been busy on the M&A front too, snapping up a sports-betting platform for £15m and a number of well-loved bingo brands from Costa Bingo for £18m as well.

These actions saw the number of first-time depositors across its brands balloon 20% in the first six months of 2019, and so robust is the company’s balance sheet that it can continue pursuing its excellent growth strategy with gusto. Forget about the regulatory uncertainties that come with the gambling industry, I’m confident that 888 will still keep delivering some mighty shareholder returns over the next decade.

The post Have £5k to spend? I’d buy these top dividend stocks for my ISA and hold them for 10 years appeared first on The Motley Fool UK.

It’s easy to see why. Landlord costs are rising. Mortgage tax relief is being cut. And the outlook for the housing market is uncertain, despite high house prices.

I believe there are much better opportunities in the stock market. Today, I want to highlight one stock I think could be the best single way to profit from property.

A global player

International real estate advisor Savills (LSE: SVS) is no ordinary high street estate agent. Last year, its revenue rose by 10% to £1,761m, generating an underlying pre-tax profit of £143.7m. In my view, this business has three features which could make it a best-buy opportunity for property investors.

One attraction is the group’s geographic diversity. About 38% of this revenue came from the UK, with a further 33% from the Asia Pacific region. The remainder was split between North America and Europe and the Middle East. This diversity means profits should hold up quite well in the event of a domestic downturn.

A second point is that the group operates retail and commercial property markets, as well as in residential property. So sales volumes aren’t dependent on one single sector of the market.

Finally, Savills also offers a range of so-called non-transactional services such as investment management and property management. These don’t depend on property sales, so they generate income even during quieter periods.

A 1,300% winner

Long-term investors have made a lot of money from Savills. The shares have risen by 1,300% over the last 20 years. That’s an average growth rate of about 14% per year, well above the wider market.

Although the dividend was scaled back during the financial crisis, the current dividend of 31.2p per share is 440% more than the 5.75p payout in 1999.

Chairman Nicholas Ferguson has warned of an uncertain outlook for 2019. But results for the year are still expected to be in line with market forecasts. These price the stock at 12 times forecast earnings, with a 3.6% dividend yield.

I think Savills looks a decent buy at this level. I see this as a business to buy for the long term, with a view to averaging down during the next property downturn.

An alternative property play

Another property stock that’s impressed me is AIM-listed Watkin Jones (LSE: WJG). This £565m firm specialises in developing and managing build-to-rent developments and student accommodation.

Both types of property are in strong demand from institutional investors. Earlier this week the company announced that it had pre-sold a 599-bed student development in Wembley for £90m, even though it won’t be ready for use until 2021.

Once it’s complete, Watkin Jones will manage the property for the new owners, generating a further income from this project.

In my view, businesses like this look more attractive than some housebuilders and much more attractive than buy-to-let. Last year, saw the firm report a 20% increase in revenue and a 26% increase in pre-tax profit. Although earnings growth is expected to slow this year, I think the 3.7% yield provides a good starting point for investors. I’d keep buying.

The post Forget buy-to-let. This property stock is my best buy instead appeared first on The Motley Fool UK.

The two companies also have some notable differences. Purplebricks was founded less than 10 years ago and is a disruptive ‘hybrid’ estate agency. Watkin Jones’ roots go back as far as 1791 and it’s engaged in a more traditional business of property development and construction. Purplebricks is currently loss-making, while Watkin Jones is not only profitable, but also pays a dividend.

Just over a year ago, I named Watkin Jones as a stock I’d buy for 2018, and Purplebricks as a stock I’d sell. In a year in which the AIM market fell 19.2%, the Watkin Jones share price declined 6.4% (220p to 206p), while the Purplebricks share price slumped a whopping 64.4% (416p to 148p). In view of the magnitude of the difference in the movement of their share prices over the past year, have I changed my rating of these two stocks for 2019?

Purple blues

A year ago, I was concerned about Purplebricks’ high valuation. The shares were trading at 160 times a maiden profit forecast for its financial year ending April 2019. It’s not now forecast to make a profit this year. Or next year. The maiden profit is currently pencilled in for the year to April 2021. And the current share price is 130 times that forecast profit.

Aside from the sky-high valuation and a maiden profit forecast that has continually retreated over the horizon (originally forecast for the year to April 2017), I have another big concern. I have serious doubts about the sustainability of Purplebricks’ business model.

House-sellers pay the company upfront whether the sale completes or not. This might have just about worked in the booming property market of the last few years, when houses were ‘selling themselves’, but we’re now seeing a slowing market — not only in the UK, but also in Australia, Canada and the US, where Purplebricks is aggressively expanding.

With traditional estate agents also fighting back, I can see Purplebricks’ going a similar way to another Woodford flop: ‘disruptive’ mattress seller eve Sleep. As such, I continue to rate the stock a ‘sell’.

Keep up with the Joneses

I believe Woodford is on far more solid ground with Watkin Jones, and I continue to rate this stock a ‘buy’. The company is a UK leader in multi-occupancy residential property, with a focus on the student accommodation and build-to-rent sectors. There’s good growth here, but I also think this positioning — together with the group’s accommodation management arm — could provide it with more resilience through the economic cycle than companies focused on some of the other areas of the property market.

Earlier this week, Watkin Jones posted record results for its financial year ended 30 September. Earnings increased 14% and its board upped the dividend by 15%. At the current share price, we’re looking at a valuation of 13.7 times trailing earnings, and a running dividend yield of 3.5%. I view this as an attractive investment proposition.

The post One Neil Woodford growth stock I’d buy, and one I’d sell appeared first on The Motley Fool UK.

House prices have been rising steadily since the financial crisis. They’re close to record highs in many areas of the country. The rules and regulations faced by buy-to-let landlords are also getting tougher, increasing costs.

That’s not all. Between April 2017 and April 2020, changes to the rules on mortgage tax relief mean that many landlords will face rising tax bills. One final headwind is that many investors expect interest rates to increase as well.

A long-term opportunity?

To make money from buy-to-let, your rental income needs to leave you with a profit after tax, mortgage payments, property costs and void periods between tenants. High property prices make this more difficult, as my colleague Kevin Godbold recently explained.

Today I want to look at two property companies operating in areas that are seeing strong growth.  The first of these is property developer Watkin Jones Group (LSE: WJG). This £540m AIM-listed company operates in the build-to-rent and student accommodation markets.

The company’s revenue rose by 20% to £363m last year, while its adjusted pre-tax profit rose by 15.7% to £50.1m. Net cash almost doubled to £80.2m, up from £41m at the end of 2017. Shareholders will enjoy a 15% dividend rise to 7.6p per share.

Watkins’ management expects to continue to benefit from favourable market conditions. It says that students are increasingly choosing purpose-built student accommodation instead of older university halls or shared houses. According to today’s results, another potential boost is that the number of 18-year-olds in the UK is expected to rise from 2021.

Fund manager Neil Woodford is Watkin Jones’ second-largest shareholder, with a 12.9% holding. I can see why Mr Woodford is attracted to this business. Today’s results have left the stock trading on a price/earnings ratio of 13.5 with a dividend yield of 3.5%. I think that these shares could easily beat buy-to-let from current levels.

A FTSE 100 star

Over the last five years, shares in warehouse specialist Segro (LSE: SGRO) have risen by 80%. The FTSE 100 index to which it belongs has gained just 4% over the same period.

This outperformance has been driven by strong demand and rising values for so-called big box warehouses. These are the huge buildings needed by large retailers, logistics groups and other firms to cope with the growth in online retail, and the supply requirements of modern industry.

One problem for potential tenants is that acquiring the large, well-located areas of land required to build new warehouses can be difficult and slow. Such is the demand for property of this type that 71% of Segro’s projects under development have been leased ahead of completion.

My only concern is that this sector may eventually overheat. I’m not sure how likely this is. The two key growth trends identified by Segro boss David Sleath are e-commerce and urbanisation. Neither seems likely to slow down just yet, from what I can see.

The shares trade at a slight premium to their last-reported book value of 603p, and offer a 2019 forecast dividend yield of 3.1%. This stock isn’t cheap. But I believe this business is likely to outperform buy-to-let. I’d be happy to own the shares.

The post I’d forget buy-to-let in 2019. Here’s a FTSE 100 stock I’d buy instead appeared first on The Motley Fool UK.