Stock tips for Profit Watch UK August 2018
We outline five investment opportunities on the back of the findings from our latest quarterly report Profit Watch UK.
As highlighted at the end of our latest Profit Watch UK report, we believe the outlook for investors is largely positive given good growth prospects. Revenue growth continues to look encouraging which in turn is good for profits. Indeed, the 6.7% growth for a typical company looks achievable, and is supported by the current weakening of the pound. Yes, risks are rising as a result of increasing global trade tensions and less robust global demand so it’s important that we give some guidance as to where investors could look to invest as a result of our latest findings.
Diversification remains key, especially in a time where there are more uncertainties over the ongoing Brexit negotiations. I have highlighted four companies and an ETF that investors may want to consider offering exposure to a range or sectors, both UK and overseas and all offering a mixture of income and growth prospects.
GlaxoSmithKline – benefitting from increasing global population
With the global population continuing to grow, demand for health services and products has naturally increased alongside it and drug manufacturers such as GSK are therefore set to continue to benefit. This is a company whose product pipeline is strong, with its recently developed products selling well and a number of new drugs due to come on to the market soon. The new R&D initiatives will focus on science related to the immune systems, the use of genetics and investments in advanced technologies and when combined with all of the upcoming launches, it’s hoped this will be enough to offset generic competition. The defensive nature of the sector and the stock, and the competitive yield (in excess of 5%) paid to investors make this a core holding for many portfolios, particularly those with a longer term view, geared towards income.
BP – opportunity to be a part of its recovery
There’s an improved confidence in the oil and gas sector, which BP is showing to investors through an increase in the interim dividend for the first time in four years and a share buyback programme. Results from the first half of this year continued to show a recovery theme. This, alongside, ongoing restructuring to become a more focussed oil and gas company, as a result of disposals, has resulted in costs being reduced dramatically. The company isn’t stopping there. Further expansion projects planned, only recently it announced the acquisition of BHP Billiton’s shales assets in North America which will give BP even more of a diverse revenue stream so the signs are encouraging. The group offers investors exposure to capital growth and income.
Marston’s – offers investors exposure to the UK
Despite the uncertainty surrounding the UK as a result of the ongoing Brexit negotiations, we would advise investors to not ignore the region all together. Pub and brewery chain Marston’s has had a blinder of a summer, courtesy of the UK heatwave and the football World Cup and so is our pick for getting exposure to the UK. The diversity of its business reduces the risk and gives Marston’s exposure to different markets making it a good growth stock. It continues to develop franchise style pubs which focus on higher margin food and drinks whilst planning to expand new built pubs and accommodation lodges. The company revealed recently that its brewing operation had seen a 61% leap in volumes so far this year and expansion plans remain on track. Investors should note that despite the shares having underperformed so far this year, the prospective dividend yield is good. We would highlight however, that events in the UK would mean Marston’s remains a contrarian stock.
Keller – looking to increase presence in high growth emerging markets
Across many countries and regions of the world, as populations become more urbanised, greenfield land is becoming increasingly difficult to build upon due to land shortages, so development is increasingly focussing towards brownfield sites. This is where Keller specialises and is set to see future benefits. Moreover, increased spending on flood defences due to climate change is another long term driver while governments around the world seek to support their economies through large scale infrastructure projects. Naturally, extreme weather conditions can hold back the company’s operations but investors should take comfort from the fact its order book remains healthy due to recent acquisitions and management are confident of a successful 2018.
Go Ucits Solutions Robo Global Robotics & Auto ETF (ROBG) – the technology frontier
A key long term prospect in the technology arena is within robotics and automation, from driverless cars, surveillance, medical procedures and care for the elderly to industrial manufacturing and processes. Demand for the use of robotics and artificial intelligence is being driven by demographic changes such as rising populations and ageing societies, diminishing resources along with the corporation's needs to keep cutting costs and improve productive efficiencies to return shareholder value. The market for robotics has grown significantly in recent years and many industry experts believe the high growth rates will be sustained for the medium to long term. Unfortunately, the UK is devoid of listed technology companies and most of the leaders in this field are American, European and Asian listed. This ETF will give a one stop access to leading companies in this ever more important field of technology and for society.
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 Investment research team arrive at their views please read our Investment Research Policy.