Every month, we ask our freelance writer investors to share their top ideas for shares to buy with investors — here’s what they said for October!
[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]
Greggs
What it does: Greggs makes and sells sweet and savoury foods through more than 2,000 stores across the UK.
By Royston Wild. Morning-goods retailer Greggs (LSE: GRG) might not be suitable for risk-averse investors. Even food specialists are suffering from weakening demand during the cost-of-living crisis. At the same time, worsening inflation is putting growing pressure on the baker’s bottom line.
Having said that, I think it has the tools to continue growing earnings even as recession approaches. So do City analysts, who think the business will report earnings rises of 1% and 4% in 2022 and 2023 respectively.
Sausage rolls, coffee, doughnuts, and the other goods Greggs is famous for sell well at all points of the economic cycle. What’s more, the bakery chain sells its products at low price points, giving its revenues column extra resilience when consumers feel the pinch.
This is why like-for-like sales rocketed 22.4% during the first six months of 2022. I’m expecting another impressive report when third-quarter trading numbers are released on Tuesday, 4 October. This could give the Greggs share price a lift following recent heavy weakness.
Royston Wild does not own shares in Greggs.
Associated British Foods
What it does: Associated British Foods is a diversified collection of businesses that includes retail, grocery, sugar and agriculture.
By Andrew Mackie: In a worsening economic environment, it might seem strange that I would choose a company whose revenue is so heavily reliant on retail. However, with Associated British Foods (LSE: ABF) share price languishing at a 10-year low, I believe the market is missing a trick here.
UK sales at Primark have been performing well and are nearly back to pre-Covid levels. However, the same cannot be said across continental Europe where like-for-like sales are down 18%. As the cost-of-living crisis intensifies, ABF is starting to see signs of a consumer spending slow down across all markets.
Whilst retail is struggling, other parts of the business are thriving. Surging sugar prices has meant that revenues are well ahead of last year. In addition, UK sugar production is up 14%. It’s a similar story in grocery, which is benefiting from price increases across a range of branded products.
ABF’s share price is now trading 17% lower than during the pandemic. That is despite all its Primark stores being open, a successful launch of its UK website earlier in the year and an expected Christmas launch of a trial click and collect.
Opportunities to pick up cheap shares in high-quality companies with proven business models don’t come along very often. The fact that ABF is a family-run business provides me with added reassurance. That is why I have been buying more of its shares recently.
Andrew Mackie owns shares in Associated British Foods.
IG Group
What it does: IG Group Holdings is a UK-based financial technology company providing an online platform for traders.
By Paul Summers: Given concerns over rapidly rising interest rates and a prolonged recession, I suspect global markets could remain choppy for a while. Should this be the case, spread-betting supremo IG Group (LSE: IGG) might be a great place to park my cash.
In contrast to most listed companies, this high-quality outfit actually benefits from volatility. This may be one reason why the share price has held up fairly well (albeit still down) over 2022.
While never guaranteed, the dividend stream also looks enticing. IG shares currently boast a forecast yield of 6%. As inflation continues to bite, that’s worth grabbing in my opinion.
Sure, there are risks here. The industry it operates in is often targeted by regulators. Competition for clients also remains fierce.
With sky-high margins and a robust balance sheet, however, I can think of a lot worse places to be invested in these tricky times.
Paul Summers has no position in IG Group
B&M European Value Retail
What it does: B&M is a leading staple & discretionary discount retailer with over 1,100 stores across the UK and France.
By Zaven Boyrazian. B&M European Value Retail (LSE:BME) is one of the UK’s leading discount retailers for both staple and discretionary items. The group operates 1,016 stores across the country under the B&M and Heron Foods brands, with a further 109 locations popping up in France.
Lately, the tailwinds from the pandemic have started dying down, causing revenue growth to seemingly stagnate. Unsurprisingly, its share price has followed, falling by a massive 50% courtesy of the stock market volatility.
However, as consumers seek to cut spending, the popularity of discount retailers is rising. And suppose the worst comes to pass and the UK falls into a recession. This could create ample opportunities for B&M to steal market share from its larger competitors.
Being a discount retailer obviously means that pricing power is basically non-existent. But with positive trends already emerging in its latest results, paired with a P/E ratio of 7.6 and a dividend yield of 5.2%, I believe Now could be an excellent buying opportunity for my stocks and shares portfolio.
Zaven Boyrazian does not own shares in B&M European Value Retail.
Greggs
What it does: With around 2,300 outlets, Greggs is the UK’s leading fast food chain. It focuses primarily on baked goods.
By Stephen Wright. In an uncertain economic environment, I’m looking for something stable. That’s why Greggs is my Best British share to buy in October.
Peter Lynch famously said that his initial interest in Dunkin Donuts came from seeing the constant queues outside – even in a recession. I feel the same way about Greggs.
From what I can see, the current cost-of-living crisis appears to be making no difference to this company. It’s easy enough to see why.
The company’s products are familiar and inexpensive. This means that they’re less likely to get cut from the budgets of price-conscious consumers.
At a price-to-earnings (P/E) ratio of under 16, I don’t think that the stock is particularly expensive. The company also generates solid returns on equity.
There’s a 3% dividend for investors looking for passive income and the company plans to expand to 3,000 stores in the future. I’d be willing to buy shares for my portfolio at today’s prices.
Stephen Wright does not own shares in Greggs.
BT
What it does: BT is a UK-based telecommunications company with operations in over 180 countries.
By Charlie Keough. My top British stock for October is BT (LSE: BT-A). The BT share price has failed to take off in the last five years. And this decline has continued into 2022 due to inflationary pressures. However, I think its shares could be a strong long-term buy.
Firstly, its attractive 5.7% dividend yield is a great way for me to put my money to work at a time when stagnant cash is losing value.
Further, I like the large infrastructure that BT already has in place. This provides the firm with, to some extent, a higher degree of pricing power. It’s also on track with its Openreach rollout, while its 5G network now covers more than half of the UK.
What does concern me is its £19bn of debt. With interest rates rising, this will only become more difficult to eradicate.
However, I think its solid foundations will help BT overcome the challenges it will face in the foreseeable future. I’d buy some shares this month.
Charlie Keough does not own shares in BT.
BAE Systems
What it does: BAE Systems is a leading defence, aerospace, and security company that serves both the UK and US governments.
By Edward Sheldon, CFA. BAE Systems (LSE: BA) strikes me as a relatively safe pick in the current environment. Given the high level of geopolitical uncertainty arising from the Russia-Ukraine crisis and the tension between China and Taiwan, governments are unlikely to reduce their defence spending any time soon.
Aside from the supportive backdrop, one thing I like about BAE Systems is the attractive dividend yield on offer. At present, analysts expect the company to pay out 26.3p per share for 2022. That equates to a yield of over 3% at the current share price. The company is also buying back its own shares – an extra reward for shareholders.
It’s worth pointing out that if the Russia-Ukraine crisis was to come to an abrupt end, sentiment towards defence stocks could deteriorate. This could have a negative impact on BAE Systems’ share price. Overall, however, I think BAE is a good stock to own right now.
Edward Sheldon has no position in BAE Systems.
InterContinental Hotels Group
What it does: InterContinental Hotels Group operates a number of different hotel brands across the globe, including Regent Hotels, Crowne Plaza, and Holiday Inn.
By Andrew Woods. My top British share for October is InterContinental Group (LSE:IHG). This hotel operator was battered during the pandemic, as virtually all of its hotels were forced to close. As a result, it slumped to a $280m pre-tax loss for 2020. By 2021, however, when many restrictions subsided, the business reported a pre-tax profit of $361m.
For the six months to 30 June, the firm stated that operating profits doubled to $377m. Furthermore, it announced that it was reinstating its dividend for the first time since 2019. It paid an interim dividend of ¢43.9 per share, a 10% increase compared to the same period in 2019. Moreover, it’s embarking on a $500m share buyback scheme. This is a signal that the company is in a strong financial position, although I’m always aware of the threat of further pandemic variants.
The business also offers geographical diversity, with established operations in the US and Europe, and a growing presence in China.
Andrew Woods has no position in InterContinental Hotels Group.
Reckitt
What it does: Reckitt is a consumer goods company. It primarily produces health, hygiene, and nutritional products, and is famously known for brands such as Dettol, Strepsils, and Durex.
By John Choong. As the UK heads into a recession, discretionary spending is expected to decline. However, demand for products from Reckitt (LSE: RKT) isn’t likely to wane due to its inelasticity as consumer staples, thus making it a contender for a position in my portfolio this October.
Although inflation can’t be ignored, the superiority of its brand appeal is unmatched across many of its product categories. This has allowed the group to raise the prices of its products while maintaining healthy profit margins of 22.5% in its latest half-year results, with management expecting better growth in the second half of the year. The fact that Reckitt earns the bulk of its revenue from outside the UK also makes it a safer investment due to the geographical diversity of its income steam.
Nonetheless, it’s worth noting that Reckitt’s balance sheet isn’t the healthiest. Having quite a high debt-to-equity ratio (107%) isn’t ideal in a high interest rate environment, and is something I should definitely take note of.
John Choong has no position in Reckitt.
