My top pick for 2019 so far has been ‘pet and vet’ business Pets at Home, which has risen by about 140% since I tipped the stock in January.
However, PETS stock is starting to look expensive to me and I don’t expect a repeat of this year’s performance. So in this article, I’m going to look at three shares from my portfolio for which I have high hopes in 2020.
As always, there are no guarantees. But I do expect all three companies to make decent progress in 2020.
Getting the picture
Television group ITV (LSE: ITV) is betting that it can offset the decline of traditional TV advertising with programme production and revenue from streaming services. The company is ramping up its investment in ad technology and recently launched a new subscription service, BritBox, in partnership with the BBC.
The broadcasting side of the business still has something to prove, in my view. But the group’s production business, ITV Studios, looks like an attractive asset to me. It makes a wide range of big name shows for both ITV channels and other broadcasters.
Revenue from ITV Studios is expected to have risen by 5% in 2019, at a profit margin of between 14% and 16%. I think that’s attractive. I can also see hidden value in the group’s vast library of past programmes.
Although profits have fallen in recent years, ITV remains highly profitable and is still generating cash. With the shares trading on 11 times earnings and offering a 5.2% dividend yield, I think now could be a good time to buy.
Poised for a return to growth
My next pick is temporary power solutions provider Aggreko (LSE: AGK). This firm provides generators and other equipment to organisations which need electricity that’s not available from the mains grid. Its operations span emerging markets, oil, mining and major events, such as next year’s Tokyo Olympics.
Aggreko has been through a difficult period over the last few years. But recent results suggest to me that the firm’s financial performance has stabilised and is starting to improve. I’m particularly pleased to see that both profits and profit margins are improving.
City analysts appear to share my view. They’ve bumped up their earnings forecasts for 2020 and are now predicting a 25% increase in profit next year.
These projections leave AGK shares trading on about 13 times forecast earnings, with a useful 3.4% dividend yield. I think that looks good value and have recently added the shares to my own portfolio.
One bank I’d buy
Banking stocks aren’t everyone’s cup of tea. And UK political uncertainty has previously added further risk. But one banking share I do own is Asia-focused Standard Chartered (LSE: STAN). Shares in this group rose by 4% on Thursday after the bank said it had sold its stake in Indonesian bank Permata for $1.3bn.
The sale price represents a profit of $0.5bn over the bank’s book value. Boss Bill Winters says the deal will free up capital for “reinvestment or return to shareholders”.
StanChart’s turnaround has been slow to arrive, but results for the first nine months of 2019 show a 12% rise in underlying pre-tax profit, to $3,847m. Despite this, the bank’s shares still trade at a 22% discount to their net tangible asset value of 922p. I see this as a good entry point for a long-term investment and remain a happy holder.
