As 2019 winds down, year-to-date the FTSE 100 and the FTSE 250 indices are up about 7.6% and 19.6% respectively. Similar broader markets gains have been achieved in many countries globally.
Trailing P/E ratios for both indices stand at 16.1 and 23.1 respectively. Many analysts are now debating whether the decade-long bull market may be on its final leg and these P/E ratios may indicate that the indices may be ready to take a breather.
Regardless of whether that happens, the stock market is home to many well-managed companies that have robust earnings. Today, I’d like to look at three companies that I believe deserve a closer look.
BAE Systems
My first pick is aerospace and defence contractor BAE Systems (LSE: BA). Year-to-date the stock is up almost 22%.
Management recently provided an upbeat trading update, mostly due to increases in UK defence spending and US military budgets. As a result, the FTSE 100 giant has built an impressive order backlog. Its major multi-year contracts in the US include the F-35 fighter and armoured multi-purpose vehicles.
The group is also increasing contracts among NATO countries, including the Netherlands and the Baltic states. In 2017, Qatar and BAE had signed an agreement for 24 Typhoon aircrafts. Management confirmed that the deal has now been accelerated.
I find the business to be well positioned for sales growth in the new year. The stock is currently trading on a forward P/E ratio of 12.2 and offering a dividend yield of nearly 4%. The next ex-dividend date will be in April.
Greencoat UK Wind
Renewable power investment trust Greencoat UK Wind (LSE: UKW) invests in operating onshore and offshore UK wind farms that are currently producing income.
Management has highlighted that “the revenue that operating wind farms receive in the UK is made up of a number of components, primarily from the sale of power produced and green benefits accredited”.
The FTSE 250 fund has been steadily growing its portfolio since its IPO in 2013 and we can expect management to weigh up and capitalise on a range of opportunities in 2020 too.
According to Renewable UK, the leading not-for-profit renewable energy trade association, renewables provide nearly a third of UK power and half of this is generated from wind energy. The world of energy is changing and this modern technology is becoming increasingly popular with the public.
Year-to-date, UKWs shares are up about 18%. The current dividend yield stands at 4.6% and the stock is expected to go ex-dividend in February.
Mitchells & Butlers
In 2019, shares of All Bar One to Harvester pubs group Mitchells & Butlers (LSE: MAB) are up an eye-popping 70%. Yet the stock is currently trading at a forward P/E of only 11.5 and is likely to reach new highs in the year ahead.
On 28 November, investors cheered full-year results for the period ended 28 September. The FTSE 250 pub chain reported higher-than-expected full-year adjusted operating profit fuelled by stronger food sales. Full year revenue came at £2.2bn, up 4% year-on-year.
Management also succeeded in reducing net debt to £1.56bn from the £1.69b it was at in FY2018 and improving the operating margin slightly to 14.2%.
Our readers may also be interested to know that the group is working with Just Eat and Deliveroo to improve utilisation of its kitchens that may have spare capacity.
Any downside? If you are an income investor, the group does not offer a dividend.
