We asked our writers to share their top stock picks for the month of December, and this is what they had to say:
Kevin Godbold: 3i Group
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3i Group (LSE: III) invests in smaller firms and develops them. The company also invests in economic infrastructure.
A stellar record of pushing up net assets and the dividend drives value creation for shareholders. The directors reckon the firm has limited exposure to geopolitical and financial market volatility.
There is net cash on the balance sheet and low gross debt. At 669p, the shares trade just 21% above the firm’s 551p net asset value, and the forward dividend yield runs near 3.5%.
Given the directors’ apparent confidence and a modest valuation, I think shares in 3i could do well in December and the years ahead.
Kevin does not own shares in 3i.
Rupert Hargreaves: Fenner
Shares in Fenner (LSE: FENR) have staged a dramatic comeback this year. After falling 50% during 2015 following a 50% loss in 2014, the shares have rallied 56% this year off the back of improving results from the company. I believe this rally can continue.
City analysts expect the group to report a pre-tax profit of £25m for its financial year ending 31 August 2017 after two years of losses. Based on this forecast, the shares are currently trading at a forward P/E of 24.3, which may seem expensive but over the past five months analysts have upgraded their earnings expectations for the group by more than 20%.
As the group’s recovery continues, there could be further upside ahead for Fenner’s shares.
Rupert does not own shares in Fenner.
Roland Head: Anglo American
Shares of Anglo American (LSE: AAL) have risen by 300% so far this year, but the shares are still worth 10% less than they were two years ago. I believe further gains are possible.
Chief executive Mark Cutifani has spent this year selling non-core assets and cutting costs. This has maximised profits from rocketing coal and iron ore prices. With another key commodity — copper — now starting to strengthen, Anglo’s mines are likely to deliver bigger profits in 2016 than seemed likely back in the summer.
With Anglo shares trading on a 2017 forecast P/E of just 9.5, I continue to hold.
Roland owns shares of Anglo American.
Harvey Jones: Carnival
2016 has been quite a celebration for cruise operator Carnival (LSE: CCL), its share price surging more than 20%. Its stock has now almost doubled in five years, recovering strongly from the Costa Concordia disaster of 2012.
Lately it has been boosted by lower fuel prices, and that should continue, OPEC meeting notwithstanding. Net revenues are up 25% this year, as cruise holidays remain in vogue, and holidaymakers will be leafing through their brochures once Christmas is over.
The 2.1% yield disappoints but it is nicely covered 2.5 times. The only cloud on the horizon is a relatively high valuation of 19 times earnings, but Carnival could still float your boat.
Harvey Jones has no position in Carnival.
Bilaal Mohamed: B&M
My favourite London-listed stock at the moment has got to be B&M European Value Retail (LSE: BME), the company behind B&M Bargains and B&M Home Stores. The shares have underperformed this year, losing around a fifth of their value over the last 12 months, and are currently trading well below their 2015 peak of 358p. For me, that signals an opportunity to buy for long-term growth.
The discount retailer opened its 500th store earlier this year, but there’s still plenty more to come as it aims to increase the number of UK stores to 850, with further openings planned for its German arm, too. Our friends in the City are projecting 10% earnings growth in each of the next two years, leaving the once-expensive shares looking good value with the P/E rating falling to 16 by FY2018.
Bilaal has no position in any shares mentioned.
Ian Pierce: Experian
Experian (LSE: EXPN) provides consumer credit checks to businesses for everything from car loans to mortgages and credit card applications. As the biggest of three major global players, Experian has a very wide moat to entry for competitors and impressive pricing power.
Besides highly profitable operations in the core North American and UK markets, Experian has also been expanding rapidly into high growth countries such as Brazil and India. The long term potential from these markets combined with high shareholder returns and the defensive nature of the business makes me believe Experian is well worth a closer look.
Ian Pierce has no position in Experian.
Peter Stephens: Unilever
Unilever (LSE: ULVR) has fallen by 9% in the last month. It now trades on a forward P/E ratio of 17.9, which is historically low for the company. Its geographical and product diversity could become increasingly appealing in 2017 as uncertainty becomes a key theme for the year. Unilever’s highly visible earnings stream and high degree of customer loyalty mean that it may survive a challenging global economic outlook better than most stocks. Its yield of 3.4% is likely to rise rapidly due to double-digit earnings forecasts, while a dividend coverage ratio of 1.5 indicates adequate headroom to enable increases in shareholder payouts.
Peter Stephens owns shares of Unilever
Edward Sheldon: Imperial Brands
Imperial Brands (LSE: IMB) shares have fallen around 16% since mid-August, and at the current price of 3500p I believe the shares offer cracking value.
The tobacco giant has increased its dividend by 10% for eight consecutive years and recently stated in its final FY 2016 results that it remains “committed to this level of increase over the medium term”. With the company paying out 155.2p in dividends for FY2016, the stock now trades with a generous dividend yield of 4.4%, forecast to grow to 4.9% next year.
Imperial’s relative strength indicator (RSI) suggests that the stock is way oversold, and with analysts forecasting earnings of 276p for FY2017, Imperial’s forward looking P/E ratio is just 12.7, a level well below many of its defensive peers.
Edward Sheldon owns shares in Imperial Brands
Paul Summers: Blue Prism
After its hugely encouraging update on 21st November, I continue to be bullish about the prospects for AIM-listed automation software developer Blue Prism (LSE: PRSM). This is despite the fact that its stock has now more than quadrupled in price since listing.
Strong new business wins (bringing the number of customers to 153 compared to 57 in 2015) and significant upsells from those already using Blue Prism’s technology have led the company to increase investment in sales and marketing at a faster rate than originally intended. Given the rapid growth expected in this market over the next few years, this strikes me as a sound move.
With a market cap of just £215m, no profits and no dividend, only those with a high tolerance for risk and sufficiently long investing horizons may be interested. Those that are, however, may be richly rewarded.
Paul Summers own shares in Blue Prism
Jack Tang: Unite Group
This December, I’m looking for unloved dividend stocks that offer enormous growth potential. One stock that seems to fit the bill is student property developer Unite Group (LSE: UTG).
The property sector is still stuck in the doldrums, thanks to to the uncertainties of Brexit. However, student property is different in that it will likely fare better than more traditional property sectors in a downturn. That’s partly due to the chronic shortfall of purpose built student accommodation in key university towns, but also because of the non-cyclical nature of demand for higher education and the steady year-on-year rise in student numbers.
Unite Group currently yields 2.6%, but given that City analysts expect dividends to rise by about 12% next year, the stock has a forward dividend yield of 3.1%.
Jack Tang does not own shares in Unite.
Royston Wild: DS Smith
I believe DS Smith’s (LSE: SMDS) half-year report — scheduled for Thursday, 8 December — could prove the precursor for a fresh share price charge.
The market missed a trick by not snapping up the packaging powerhouse following October’s bubbly market update, in my opinion. DS Smith advised in a pre-close statement that “the business has again made good progress and performance remains in line with our expectations,” and added that “volume growth continues to be supported by strong ongoing growth with our large pan European customers.”
This sustained strength comes as little surprise as DS Smith’s commitment to innovation, not to mention bolstering the scale of its operations through huge organic investment and shrewd acquisitions, underpins demand from the continent’s biggest FMCG operators.
And DS Smith’s low valuations certainly leave room for a December charge. A predicted 13% earnings rise for the year to April 2017 results in a low P/E ratio of 12 times, while the dividend yield reads at a chunky 3.6%.
Royston Wild has no position in any shares mentioned.
