Every month, we ask our freelance writers to share their top ideas for value stocks to buy with investors — here’s what they said for July!
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DCC
What it does: DCC’s three divisions help companies in the energy, healthcare and technology sectors create growth and resilience.
By Harvey Jones. Shares in FTSE 100-listed DCC (LSE: DCC) just can’t catch a break these days. They’re down 35% over five years, 11% over one year and have been sliding in recent weeks, too.
Last time I looked at them, just three months ago, they traded at 10.1 times earnings, and I thought they looked tempting then.
Today, they’re even cheaper at 9.5 times earnings. That looks good value to me.
Of its three divisions, DCC Energy, one of the fastest-growing propane retailers in the US, generates the bulk of its earnings.
It has been boosted by high energy prices and the obvious risk is that it will suffer as prices fall, which largely explains why DCC is out of favour today.
While DCC Energy’s revenues grew 12.4% to £457.8m in the 2023 financial year, DCC Technology actually posted faster growth of 29.9% to £106.1m.
That diversification is appealing, although the downside is that DCC Healthcare is trailing, with revenues down 8.6% to £100.4m.
Yet with total group revenues up 25.2% to £22.2bn and adjusted operating profit up 11.3%, the overall outlook is bright.
Net debt did rise from £756.6m to £1.1bn in the year March, which is a concern as interest rates rise. However, management is mostly using the money to fund acquisitions that with luck should drive future earnings.
Management increased the dividend per share by 6.5% to 187.21p, and the stock now yields 4.3%, covered 2.4 times by earnings.
Best of all, DCC has an unbroken record of dividend growth at a compound annual rate of 13.5% over its 29 years as a listed company. Management won’t want to damage that and I expect the dividends to flow while we wait for the share price to recover.
Harvey Jones has no position in any of the shares mentioned.
GSK
What it does: GSK is one of the biggest and most renowned pharmaceutical and biotech companies in the world.
By John Choong: Since spinning its consumer-facing arm Haleon off, GSK (LSE:GSK) shares have been trading sideways. However, this isn’t necessarily a bad thing as it could give investors like myself an opportunity to buy the shares at a reasonable price. Although revenue saw a slight dip in its most recent quarter, one shouldn’t be so quick to discount GSK’s potential given its lucrative backlog.
The firm’s RSV vaccine recently got approval and has another 68 new treatment that are pending approval — all of which can meaningfully contribute to GSK’s revenue and profits in the coming years. Additionally, its recent acquisition of Bellus Health — which develops market-leading treatments for chronic coughs — could be a profit booster.
But most lucratively, GSK stock is currently trading at a relatively cheap forward P/E ratio of 10. And considering that its PEG ratio is also under 1, I see GSK as a potentially safe, value play for growing my wealth over the coming years.
| Metrics | GSK | Industry Average |
| P/B ratio | 4.7 | 4.7 |
| P/S ratio | 1.9 | 3.3 |
| Adjusted P/E ratio | 12.4 | 21.4 |
| FP/S ratio | 1.9 | 2.8 |
| Adjusted FP/E ratio | 10.4 | 14.8 |
John Choong has no position in any of the shares mentioned.
Legal & General
What it does: Legal & General is a UK-based financial services company with a focus on four main areas.
By Charlie Keough. For July, I have my eye on Legal & General (LSE: LGEN). The value stock has struggled in 2023. However, despite it already being a holding in my portfolio, I see this as an opportunity to top up on some shares.
As I write, the stock currently trades on a price-to-earnings ratio of just above 6. This sits comfortably below the FTSE 100 average.
Aside from its cheap price tag, Legal & General also offers a sizeable dividend yield of nearly 9%. With UK inflation for June coming in hotter than expected, the passive income generated from this investment seems like a smart move.
The firm is also welcoming new CEO António Simões in January 2024. With his international experience, this could aid Legal & General’s overseas operations.
Given the cost-of-living crisis, the business may see customers batten down the hatches and forgo making investments in favour of keeping some cash spare.
However, as a long-term buy, I’m a big fan of Legal & General.
Charlie Keough owns shares in Legal & General.
Vodafone
What it does: With revenue of €46bn in 2023, Vodafone’s considered to be a mobile and fixed line telecoms giant.
By James Beard. A stock offering good value could be one whose market cap doesn’t accurately reflect the underlying assets of the business. At 31 March 2023, Vodafone‘s (LSE:VOD) book value was €57bn (£49bn). This is more than twice its current stock market valuation of £20bn.
Another possible indicator of an undervalued stock is a high yield. Vodafone’s is currently over 10% as I write. This is as a consequence of a fall of 60% in its share price over the past five years, rather than the level of its dividend, which has remained unchanged.
The company’s chief executive has only been in post since April. But already she’s announced a €1bn cost cutting exercise and concluded the merger with Three.
But previous turnaround plans have failed. And the company still has a debt pile of €66bn. Both of these present risks to any investor buying the shares now.
However, I’m confident that the recently announced changes will soon help the stock grow once more, better reflecting the value of the business.
James Beard owns shares in Vodafone
