2 shares I’d like to own in 2020

As the end of 2019 approaches, here are 2 shares Andy Ross thinks could outperform the market in 2020.

| 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.

The FTSE 250 has had a strong 2019 so far, despite Brexit dramas. Hopefully, a Santa Rally can push share prices even higher in the coming weeks. Looking further ahead I’ve been thinking about shares I believe could do well next year and here are two of them.

A different business

FDM Group (LSE: FDM) is a supplier of IT consultants, that it calls Mounties. Revenue in the last three years has gone from £189.4m to £244.9m, an increase of 29%. Meanwhile, profit before tax has jumped from £35.3m to £48.3m, a 37% rise.

With a growing client base and increasing geographic diversity, I believe that FDM is tapping into a huge market opportunity, delivering its own trained Mounties to client premises to deliver a high-value service. I expect the market will grow substantially in the coming years, as IT becomes ever more important for businesses.

The group has no debt and at the time of its 2018 annual report and in fact had a closing cash balance of £33.9m. Conservative management of the business leads me to believe that the business will flourish whatever the next 12 months may bring.

With the share price haven fallen during 2019, I’m optimistic of a rebound in 2020, especially now as the group has a yield of just under 4% and trades on a price-to-earnings ratio of around 21.

With a progressive dividend policy in place, I expect FDM will keep rewarding shareholders with larger dividend payouts alongside an improvement in the share price over the next 12 months.

Going for growth

Ascential (LSE: ASCL) is another FTSE 250 listed company that also hasn’t had the best 2019, with its share price down 10%. The exhibitions and information services provider now has a P/E of 22, which is down from 26 based on the previous year’s earnings per share, so the shares have been more expensive in the past.

The P/E, however, is not what I like about the company. What I like is its half-year results which showed that pre-tax profits rose to £30.5m from £23.1m as revenue increased 25% to £236m. The company also is intent on continuing to deliver double-digit growth.

The company is also investing in growth. It has bought an initial 35% interest in cybersecurity provider Avast’s marketing analysis unit, Jumpshot, for $60.8m. It is likely that in the coming years Ascential could take a majority stake in the business.

Ascential is a high-margin business with an adjusted earnings before interest, tax, depreciation, and amortisation, and margin of just over 29% which I think makes it easier for the group to grow. Net debt leverage has also been reduced dramatically which I think will boost future profitability, it now sits at 1.1 times. In 2017 it was 2.3 times.

As the cold winter nights draw in, I’m optimistic about the chances of success for both these companies that struggled to achieve share price growth in 2019. I think 2020 could be far more rewarding for shareholders.

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.

Andy Ross has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

5 steps to start buying shares with under £500

Learn how this writer would start buying shares with a few hundred pounds in a handful of steps, if he…

Read more »

Young happy white woman loading groceries into the back of her car
Investing Articles

The FTSE 100 offers some great bargains. Is this one?

Our writer digs into one FTSE 100 share that has had a rough 2024 to date, ahead of its interim…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

£9,000 of savings? Here’s my 3-step approach to aim for £1,794 in passive income

Christopher Ruane walks through the practical steps he would take to try and turn £9,000 into a sizeable passive income…

Read more »

Group of young friends toasting each other with beers in a pub
Investing Articles

I’d buy 29,412 shares of this UK dividend stock for £150 a month in passive income

Insiders have been buying this dividend stock, which offers an 8.5% yield. Roland Head explains why he’d choose the shares…

Read more »

Red briefcase with the words Budget HM Treasury embossed in gold
Investing Articles

Could the new UK budget spell growth for these 6 FTSE stocks? I think so!

Mark David Hartley considers six UK stocks that could enjoy growth off the back of new measures announced in the…

Read more »

Investing Articles

With a 6.6% yield, is now the right time to add this income stock to my ISA?

Our writer’s looking to boost his Stocks and Shares ISA. With this in mind, he’s debating whether to buy a…

Read more »

Dividend Shares

This blue-chip FTSE stock just fell 12.5% in a day. Is it time to consider buying?

Smith & Nephew is a well-known, blue-chip FTSE stock with a decent dividend yield. And its share price just dropped…

Read more »

Investing Articles

At 72p, the Vodafone share price looks to be at least 33% undervalued to me

Our writer looks at a number of valuation measures to determine whether the Vodafone share price reflects the fair value…

Read more »