Stock picks to heat up your portfolio this summer
With temperatures peaking, we look at four companies that could benefit if the sun continues to shine.
The Brits love a holiday and cruises are one of the fastest growing parts of the leisure sector. As the largest cruise company in the world with a total of 100 ships and 212,000 berths, Carnival is certainly in a strong position to benefit from this trend. Its recent second quarter figures reported a 30% increase in adjusted earnings and a 13% rise in revenues to a record $4.4bn. Moreover, the group continues to enjoy sustained improvement in booking trends as it continues to expand to emerging markets like China and there is a good demand for cruises stopping in Cuba. We recommend the stock as a ‘buy’ for medium-risk investors.
Telecommunications giant Vodafone allows Brits abroad to ‘share while there’. Offering 4G in some overseas holiday locations the company may benefit as holidaymakers use their text and data to brag from the beach this summer. Full year results published in May reported a fall in revenue but profits rose by 15.4%; the growth in data demand is a key driver for the business in the long term and opportunities abroad such as mergers and acquisitions in Germany, Eastern Europe and India should generate significant synergies. The dividend yield should make this an attractive stock for income seekers willing to take on a low to medium level of risk.
Smith & Nephew
Global orthopaedics Company Smith & Nephew develops, manufactures, markets, and sells medical devices in the sectors of advanced medical devices and advanced wound management. With the nation wrapped up in the football frenzy, we suspect that those that can’t bend it like Beckham may be in need of sports medicine. As well as sporting injuries, the group is also a beneficiary of the ageing society in the West and increasing numbers of middle class consumers in developing regions. There’s also an attractive pipeline of new products and the group is set to benefit from investments in marketing and acquisitions. Its most recent trading update in May posted a 5% increase in revenues, aided in particular by emerging markets. Revenues in developed markets faced softer market conditions and there was weak performance of their Advanced Wound Bioactives products due to deepening seasonality patterns and distributor stocking activities, but the longer term drivers remain in place and the company has continued to show good underlying performances. We recommend Smith & Nephew as a ‘buy’ for medium-risk investors seeking capital growth.
Diageo’s beverage brands include Smirnoff vodka, Gordon’s gin, Captain Morgan rum, Guinness and a summer favourite, Pimm’s. A good product mix combines with geographic diversification providing exposure to large, developed markets such as the US, as well as fast-growing emerging markets in Asia. A long hot summer should increase demand for many of its brands. It also now has full control of USL in India, the most important emerging market, so prospects are certainly positive in several markets. We continue to recommend Diageo because of the strength of its brands, resilient sales in the US market, excellent long-term prospects for emerging markets, continued improvements in cost-cutting and a reasonable dividend yield.
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