Should You Buy AstraZeneca plc, Reckitt Benckiser Group Plc Or Premier Foods Plc For Your 2015 ISA?

Royston Wild looks at whether AstraZeneca plc (LON: AZN), Reckitt Benckiser Group Plc (LON: RB) or Premier Foods Plc (LON: PFD) are worthy stock choices for the coming year.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Today I am looking at three very different businesses that I consider strong investment candidates.

Drugs demand poised to charge

Like the rest of the world’s big-cap pharma plays, AstraZeneca (LSE: AZN) (NYSE: AZN.US) has seen revenues sink in recent years as the effect of patent expirations across key labels has bitten. This phenomenon caused earnings at the Cambridge-based firm to rattle lower for the fourth consecutive year in 2014.

And the company faces further headaches in the near future, with generic competition set to attack the dominance of its Nexium stomach treatment and Crestor cholesterol-battling drug in the near future. As a consequence, the business is expected to rack up extras earnings dips of 5% and 3% in 2015 and 2016 correspondingly.

However, there are growing signs that AstraZeneca may be turning the corner and setting itself up for terrific long-term growth. The company has accelerated its product pipeline and set a record of six new product approvals in 2014, while plans to establish a network of new laboratories across Europe and the US — combined with a steady stream of acquisitions and synergies with industry leaders — should help it to develop the next generation of sales drivers.

Emerging markets bolsters growth outlooks

And like household goods giant Reckitt Benckiser (LSE: RB), AstraZeneca is also a great play on emerging markets, where rising economic growth is driving healthcare demand through the roof. Indeed, the medicines giant saw sales to developing markets advance 12% last year, underpinned by strong performance in China where revenues leapt 22%.

The effect of rising personal income levels is also driving demand for consumer goods, benefiting Reckitt Benckiser whose market-leading brands like Durex contraceptives and Dettol cleaning product range carry exceptional sway in new territories. Indeed, like-for-like sales in the RUMEA (Russia, Middle East and Africa) region climbed 11% in 2014, while LAPAC (Latin America and Asia Pacific) demand advanced 5%.

The terrific pricing power of these labels has enabled the firm to keep revenues rising despite the effect of wider cyclical headwinds battering these markets. With sales moving resolutely higher in established and new territories alike, and massive cost-cutting initiatives helping to boost margins, I believe Reckitt Benckiser is in great shape to keep earnings chugging along nicely.

The right recipe for success

Although Premier Foods (LSE: PFD) lacks the same global presence as AstraZeneca or Reckitt Benckiser, I reckon the company’s strong presence in Britain makes it a strong growth candidate — more than nine-tenths of the UK’s shoppers are said to have bought one of the firm’s products during the past 12 months.

The manufacturer of Bisto gravy, Sharwoods Asian-themed foods and Ambrosia desserts has seen the top line take a steady pasting in the aftermath of the 2008/2009 recession, thanks to reduced consumer spending power and then the heavy discounting implemented across the grocery sector.

But with Premier Foods having slashed the number of products it makes from around 1,700 to around 1,000 now — bringing it in line with the strategies of the country’s major supermarkets — and having stepped up marketing and product innovation across key brands, the business is now in great shape to enjoy stellar earnings growth in my opinion. Indeed, Premier Foods recorded its highest quarterly market share for three years during September-December, helped by the relaunch of its Mr Kipling cakes range.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Is GSK a bargain now the share price is near 1,333p?

Biopharma company GSK looks like a decent stock to consider for the long term, so is today's lower share price…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

Could December be a great month to buy UK shares?

Christopher Ruane sees some possible reasons to look for shares to buy in December -- but he'll be using the…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

Sticking to FTSE shares, I’d still aim for a £1,000 monthly passive income like this!

By investing in blue-chip FTSE shares with proven business models, our writer hopes he can build sizeable passive income streams…

Read more »

Growth Shares

BT shares? I think there are much better UK stocks for the long term

Over the long term, many UK stocks have performed much better than BT. Here’s a look at two companies that…

Read more »

British Pennies on a Pound Note
Investing Articles

After a 540% rise, could this penny share keep going?

This penny share has seen mixed fortunes in recent years. Our writer looks ahead to some potentially exciting developments in…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing Articles

Is the S&P 500 going to 10,000 by 2030? This expert thinks so

One stock market strategist sees animal spirits taking hold and driving the S&P 500 index even higher by the end…

Read more »

Investing Articles

I’m expecting my Phoenix Group shares to give me a total return of 25% in 2025!

Phoenix Group shares have had a difficult few months but that doesn't worry Harvey Jones. He loves their 10%+ yield…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

14.5bn reasons why I think the Legal & General share price is at least 11% undervalued

According to our writer, the Legal & General share price doesn’t appear to reflect the underlying profitability of the business. 

Read more »