Every month, we ask our freelance writer investors to share their top ideas for stocks to buy with investors — here’s what they said for August!
[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]
Scottish Mortgage Investment Trust
What it does: Scottish Mortgage invests in a global portfolio of companies through a mix of listed and unlisted shares.
By Charlie Keough. My top British stock for August is Scottish Mortgage Investment Trust (LSE: SMT). I’ve long been a fan of this equity. And with its share price taking a hit this year, I think this offers a great time for me to buy.
The management team aims for growth over a five-year period. And while past performance is no guarantee of future returns, the last five years have seen the trust return around 100% to shareholders.
Scottish Mortgage has suffered this year due to its focus on growth stocks. While these may continue to stall in the near run, over a more extended period I think the trust has the potential to provide me with some substantial returns (like it did when buying Tesla in 2013).
Ongoing struggles in China, along with the likely potential of inflation continuing to dampen investor confidence, could see the stock slip. However, I’d buy the stock in August as a long-term hold.
Charlie Keough does not own shares in Scottish Mortgage Investment Trust.
Premier Foods
What it does: Premier Foods manufactures a broad range of foods and ingredients like cakes, custard, cooking sauces and gravy.
By Royston Wild. Purchasing shares in food producers like Premier Foods (LSE: PFD) has traditionally been a popular play for investors during tough economic times. Food is one thing that people don’t stop spending on when times get tough.
But businesses like this aren’t risk-free at the moment. Spending is plummeting at an alarming rate as the cost-of-living crisis worsens. The Office for National Statistics says that 50% of Brits are buying less food when doing the food shop.
But in this climate I’m encouraged by how resilient trading at Premier Foods has remained. Revenues here rose 6% in the 13 weeks to 2 July, meaning the business remains on track to meet full-year expectations.
I like Premier Foods because it sells food at the value end of the market under brands like Batchelors. Furthermore, I appreciate the excellent brand power of products like Mr Kipling cakes and Homepride cooking sauces. Volumes of beloved labels like these tend to remain more stable during downturns.
Premier Foods trades on a forward P/E ratio of just 10.2 times. I think this makes it a top value stock to buy in August.
Royston Wild does not own shares in Premier Foods.
Experian
What it does: Experian is a British technology company that specialises in consumer credit data.
By Edward Sheldon, CFA. FTSE 100 company Experian (LSE: EXPN) has seen its stock price pull back in 2022 and I think this has provided an attractive buying opportunity in August.
A trading update posted in mid-July showed that the company has momentum at present. For the three-month period to 30 June, total revenue was up 7% year on year. Meanwhile, looking ahead, the company said that it expects total revenue growth of 8-10% for the year ending 31 March 2023.
As for the stock’s valuation, it seems quite reasonable to my mind. With analysts currently expecting the group to generate earnings per share of around $1.36 this year, the P/E ratio here is around 25. I don’t see that as excessive given Experian’s market dominance, growth rate, and high level of profitability.
Of course, if the tech sector continues to experience weakness, Experian shares could underperform in the near term. Taking a long-term view, however, I see the risk/reward profile here as attractive.
Edward Sheldon owns shares in Experian.
International Consolidated Airlines Group
What it does: This company is an airline conglomerate that operates across the entire globe. It owns a number of well-known airlines, including British Airways, Aer Lingus, and Iberia.
By Andrew Woods. International Consolidated Airlines Group (LSE:IAG) was battered as the pandemic made its way around the world. This was primarily because countries shut their borders and virtually all commercial flights were grounded.
The result was that IAG swung to a €7.8bn pre-tax loss in 2020 as its income sources became ever more limited. This forced the firm to issue new shares to raise capital in the midst of the crisis.
In 2021, however, pre-tax losses more than halved to €3.5bn. During an update for the first three months of 2022, it stated that it may even return to profitability in the middle of this year. In those first three months, revenue climbed to €3.4bn compared to €963m for the same period in 2021.
Although passenger capacity is improving, recent cancellations due to staff shortages could delay progress. Nevertheless, I think August may reveal that IAG has once again hit calmer skies and I’ll be adding more shares if it does.
Andrew Woods owns shares in IAG.
Fresnillo
What it does: Fresnillo is the world’s largest primary silver producer and Mexico’s largest gold producer, with seven operating mines.
By G A Chester. Fresnillo (LSE: FRES) has been through a difficult few years. Covid disrupted its operations quite severely at times. And the introduction of new labour legislation last September also presented challenges.
However, management recently reported a solid second quarter of production in line with its expectations. It said this was despite some continued impact from the pandemic.
The company’s also made good progress in adapting to the Mexico labour reform. This required it to internalise a high proportion of its contractor workforce. It said its recruitment and training campaigns are proving effective and that it should complete the process by the end of the year in its underground mines. Meanwhile, it said its open pit mines are now fully staffed.
With operations normalising, a Covid-delayed major growth project ready to ramp-up, and a good pipeline of further development projects and exploration prospects, I think Fresnillo is ripe for a recovery.
G A Chester does not own shares in Fresnillo.
Ibstock
What it does: Ibstock is the UK’s leading manufacturer of clay bricks and concrete products used by the construction industry.
By Zaven Boyrazian. The property market is notoriously cyclical. And with the Help-To-Buy scheme coming to an end soon, it’s possible for a downturn to be arriving soon. However, when it comes to long-term demand, the need for housing isn’t going anywhere. And that’s terrific news for my top stock to buy for August, Ibstock (LSE:IBST).
The brick manufacturer has suffered quite a few disruptions from Covid-19. However, those woes seem to be in the past and business has begun to ramp up again.
Its latest interim results demonstrated double digit growth for revenue and profits thanks to an uptick in sales volumes. Meanwhile construction for its new Atlas and Aldridge redevelopments continue to be on track for completion for the end of 2023.
Once brought on-line, these facilities will expand the firm’s manufacturing capacity by 115 million bricks per year. And given Brexit has made importing bricks far more expensive, the firm may be in a prime position to capitalise on the opportunity.
Zaven Boyrazian does not own shares in Ibstock.
Moneysupermarket.com
What it does: Moneysupermarket.com operates price-comparison sites for money, home services, money, insurance and other products
By Paul Summers: I’ve been banging the drum on Moneysupermarket.com (LSE: MONY) for some time now. Unfortunately for me, other investors haven’t agreed with my bullish view and the share price is still down 18% in the last year. The inability of consumers to switch energy suppliers hasn’t exactly helped.
Despite this, I’m in no mind to sell my holding. Quite the opposite.
Earlier this month, the company stated that revenue had grown 19% over the first six months of 2022. Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) rose 10%, which was ahead of expectations. The interim dividend was maintained too.
With consumers trying to save money where they can, I think this positive momentum can continue. At just below 16 times earnings as I type, the stock still trades at an attractive valuation and there’s a 5.7% yield in the offing if the full-year payout is kept steady.
Paul Summers owns shares in Moneysupermarket.com
Airtel Africa
What it does: Airtel Africa is a leading operator of telecoms networks and mobile money services in Africa.
By Roland Head. Shares in Airtel Africa (LSE: AAF) have doubled since the company floated on the London Stock Exchange three years ago. I think further gains are likely.
Recent first-quarter results showed revenue up by 13% to $1,257m during the three months to 30 June. This growth was mainly due to a 25% increase in mobile money revenue and a 20% rise in data revenue.
Many African countries lack the formal banking networks and fixed-line telecoms services we take for granted. I think that demand for internet and financial services will continue to be driven by rising mobile usage.
One possible risk is that Airtel Africa carries a fair amount of debt — $3,056m at the last count. However, debt is falling, and cash generation is strong.
Airtel shares trade on 11 times forecast earnings, with a 3% dividend yield. I see the stock as a long-term buy in August at this level.
Roland Head owns shares in Airtel Africa.
Compass Group
What it does: Compass Group is a FTSE 100 global leader that runs workplace canteens for thousands of organisations across 44 countries.
By Harshil Patel. Given soaring food prices, some might be surprised that I think it’s a good idea to buy food services provider Compass Group (LSE:CPG). But it’s rising food and energy costs that are pushing more organisations to outsource this function.
As a specialist in the field, Compass has a better chance to provide catering functions at lower cost and greater flexibility.
Compass says that it’s winning new business. And that has helped it to raise its sales growth predictions for the second time this year. I reckon it’s a trend that could continue into next year.
Whereas finding the right staff is a challenge plaguing many organisations right now, Compass seems to be managing relatively well.
Now, as it’s a physical business, any further pandemic-related disruptions could affect earnings. However, all things considered, I’m banking on its strong cash flow, earnings growth and dividend growth to provide me with solid shareholder returns.
Harshil Patel does not own shares in Compass Group.
