2 Brit-biased stocks I’d buy before Lloyds Banking Group plc

Royston Wild reveals two London stocks with better investment potential than Lloyds Banking Group plc (LON: LLOY).

| 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 two stocks that I think are hotter investment prospects than Lloyds Banking Group (LSE: LLOY).

Matinee idol

I reckon Cineworld (LSE: CINE) in great shape to thrive in 2017 as box office takings continue to explode.

Advertising agency DCM announced last week that movie admissions to the end of October rose 2%, movie bible Screen Daily reported. Whilst this figure is hardly explosive in its own right, it helped total UK takings breach the £1bn milestone in record time in 2016. The level was reached on October 8 versus October 25 last year, which itself was then a new record.

Moviegoer demand has been boosted by a steady stream of blockbusters like Marvel’s Deadpool and Captain America: Civil War, the latest James Bond outing Spectre, and Harry Potter follow-up Fantastic Beasts and Where to Find Them. Whilst not necessarily popular with the critics, the popcorn flick is more popular than ever, and the slate for next year and beyond is choc-full of high-energy films that should continue to drive footfall.

Like Lloyds, Cineworld is also reliant on British citizens to drive the top line — the chain sources almost two-thirds of revenues from the UK and Ireland.

But I expect a stagnating British economy to have only a modest impact on Cineworld looking ahead. After all, going to the cinema is a relatively cheap, not to mention universally popular, night out.

Sports star

The British high street faces more of an uncertain outlook, however, as inflation is predicted to rocket from 2017. Having said that, I believe JD Sports Fashion‘s (LSE: JD) dominance of the ‘athleisure’ segment should keep earnings ticking higher.

The strong relationships JD Sports has forged with the world’s biggest sportswear manufacturers makes it the place to go for shoppers seeking cutting-edge sports-fashion. And the business remains busy expanding its product ranges, not to mention its store network in the UK, to keep consumers flocking through its doors.

Furthermore, the company’s aggressive expansion across Europe should help protect it against a cooling domestic retail sector looking ahead and deliver stunning growth in the years ahead.

JD Sports added a net 20 stores to its continental footprint between February and July alone. And the retailer remains busy on the M&A front, too, JD Sports snapping up Netherlands-based retailers Aktiesport and Perry Sport in 2016, as well as 12 The Athletes Foot stores in Portugal, with a view to later conversion to the JD fascia.

Worth the premium?

The City certainly believes that both JD Sports and Cineworld have what it takes to keep punching solid earnings growth. The sportswear giant is expected to punch earnings growth of 27% and 11% in the periods to January 2017 and 2018 respectively, while the cinema chain is predicted to report a 14% bottom-line boost next year.

Conversely, a flatlining UK economy is expected to play havoc with earnings at Lloyds, and a 7% earnings dip is currently forecast for 2017.

While both Cineworld and JD Sports are more expensive than the bank — the stocks carry prospective P/E ratios of 15 times and 20.6 times for the upcoming fiscal year compared with Lloyds’ equivalent figure of 9.7 times — I believe both company’s superior growth outlooks more than merit this premium.

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. The Motley Fool UK has no position in any of the 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

Fools wouldn’t touch these 5 FTSE 350 flops with a bargepole – how come I own 3 of them?

Harvey Jones took a chance on three struggling FTSE 350 stocks in the hope that they'd stage a dramatic recovery.…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

How I’m trying to make a million from passive income

Invest as much as possible, regularly, and use the passive income to plough back into more shares. Here's how millionaires…

Read more »

Investing Articles

I’d buy 30,434 shares of this UK dividend stock to target £175 a month in passive income

A top insider has spent over £1m buying this 9%-yielding passive income share over the last year. Roland Head explains…

Read more »

Growth Shares

Should I buy Rolls-Royce shares for 2025?

Edward Sheldon’s missed out on the huge gains that Rolls-Royce shares have generated this year. But should he buy the…

Read more »

Investing Articles

30,000 shares in this FTSE 250 REIT could earn me £559 a month in passive income

Real estate investment trusts can be great passive income investments. And Stephen Wright likes one from the FTSE 250 with…

Read more »

Investing Articles

Down 24% and yielding 9.18! Is L&G the best passive income stock on the FTSE?

Harvey Jones is the first to admit that the Legal & General share price has had a poor year. But…

Read more »

Investing Articles

Warren Buffett just bought these 2 stocks!

Warren Buffett just invested $700m in these stocks! What’s the strategy behind them, and should investors think about following in…

Read more »

Investing Articles

£10 a day invested in UK stocks could create a second income of £40,000 a year!

Investing even a small amount of money regularly can generate a substantial second income stream in the long run. Zaven…

Read more »