The Share Centre - Winter stock picks 2016

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Winter stock picks

Our expert analyst Helal Miah, outlines four companies that have the potential to benefit during the winter months.

Marks & Spencer

British high-street favourite Marks & Spencer will be hoping that consumers flock to their stores over the next few weeks to buy that much needed Christmas Jumper, glittering party dress or Christmas gift for their loved ones.

Investors should appreciate that although impacted by price deflation, food sales are being helped by the launch of new food lines and the opening of more of the ‘Simply Food’ convenience stores, so the company will be pulling out all the stops to entice people in to buy their festive spread.

The company has now embarked on a significant programme of change to alter the balance of its stores between food and clothing, while trying to improve its clothing sales. It has reported some encouraging early signs of progress but investors will need to be patient and it is worth noting that uncertainty caused by Brexit may lead to lower economic growth and impact consumer spending. While the healthy dividend remains attractive for income seekers this is only for contrarian investors and we would recommend drip feeding into the stock for now.

Update 29 December:
The company has now embarked on a significant programme of change based on a strategic review by new CEO Steve Rowe where the aim is to reduce the number of clothing and home stores as well as to cut back on its overseas operations. 

ITV

The clocks have gone back which means it is pretty much dark by lunchtime these days, which should be great news for broadcasters such as ITV as more of us opt for a night in front of the TV rather than going out. With so many options now available to consumers ITV has had to fight hard to maximise its audience share. Recent results have demonstrated that the business is continuing to move in the right direction and analysts are encouraged by the improvement at its Studios business, with a significant increase in new commissions and its digital offering.

In a fast changing environment the changes that have been made in the group appear to have come in time to save what was once a troubled company. The debt situation has been addressed, which has enabled the group to make a number of acquisitions, geared towards boosting its production business.  The result of the Brexit vote hit the share price hard, as a result of concerns over its UK exposure and the effect on advertising rates. However, some analysts have suggested that this fall may have been an over-reaction. We agree and subsequently recommend ITV as a ‘buy’ for medium risk investors, but would suggest investors drip feed until the situation for advertising rates becomes a little clearer.

Update 29 December:
A trading update in November warned that economic and geopolitical events are making advertisers more cautious. Over the third quarter advertising revenue fell by 4% and the group expect this trend to continue into the fourth quarter.

Breedon Group

Breedon Group is the largest independent construction materials group in the UK, providing various aggregates to the construction and building industry. As the weather takes a turn for the worse, it is likely that there will be an increased amount of damage to the roads and public surface areas, therefore the group could benefit as there will be repairs to be made. As most drivers will be only too aware spending on road repairs has hardly been top of the agenda for hard pressed local councils. In fact infrastructure spend overall has been sluggish, despite politicians recognising the part this could play in any economic recovery. Breedon would be a direct beneficiary of increased infrastructure spending, which investors should appreciate the group are expecting to grow strongly through to 2018.

The company has been positioning themselves to benefit from any pick-up in the economy and demand for its products, leading to a number of acquisitions, most recently the acquisition of Hope Construction last year for £336m. These acquisitions should help expand its geographical presence in the UK. Since our September 2013 recommendation the share price has risen by around 140%, as a result of continued recovery in the UK construction sector. This is a smaller AIM listed company that is geared to a recovery in infrastructure spend and as a result, we recommend Breedon Group as a ‘buy’ for medium to high risk investors prepared to take a longer term view.

Carnival

Carnival is the largest cruise company in the world with a total of 100 ships and 212,000 berths. The company offers cruises in North America, continental Europe, the UK, South America and Australia giving consumers plenty of options for some tempting winter sun! The company continues to outperform and recently stated that results were better than expected resulting in it raising its full year guidance. Lower fuel costs and strong booking levels were the main factors boosting the figures and the group said it was on track to deliver 25% earnings growth this year.

Following a dip in the share in April this year, we upgraded our recommendation to a 'Buy' due to relative good value represented by the current price, the strong earnings growth boosted by lower fuel costs and the potential growth in Asia. Strong cashflow is enabling the group to raise dividends quickly and support a share buyback scheme whilst there is the potential benefit of improving relations between the US and Cuba, which could lead to a lifting of the long-running trade embargo and boost demand for cruises in the Caribbean.

Update 29 December:
Fourth quarter results in December showed the company finished the year strongly and the managements said advance bookings for the first three quarters of 2017 were well ahead of 2016 at higher prices. However, rising fuel costs and adverse foreign exchange movements are expected to make progress more difficult.

Originally published: 02/11/2016

Last updated: 29/12/2016

All information given including prices, yields and our opinion is correct at the time of publication.  Our opinions on investments can change at any time and for our latest view please go to www.share.com.  To understand how our Advice team arrive at their views please read our Investment Research Policy.

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