Every month, we ask our freelance writers to share their top ideas for shares to buy with investors — here’s what they said for February!
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Babcock International
What it does: Babcock designs and manufactures specialist defence and engineering equipment to support national defence.
By Mark Hartley. With a £2.2bn market cap, Babock (LSE:BAB) is a comparatively small FTSE 250 company that supports defence initiatives in the UK and abroad. Early last year, reports emerged alleging that Babock had used glue to fix bolt heads on a nuclear submarine. Controversy ensued and the company quickly addressed the situation, but it still suffered considerable losses in the following months.
However, a swift recovery occurred soon after. As global demand for defence equipment escalated in late 2023, so did Babcock’s share price. Now up 47% over the past year, it’s finally broken back above the key 400p level it lost during Covid. The growth has prompted UK-based stock broker Numis to bump Babcock from a hold to buy, increasing their price target from 325p to 530p this month.
With a recently reinstated dividend and a new deal to develop Australia’s nuclear submarine program, I think Babock is back in business.
Mark Hartley does not own shares in Babcock International.
Burberry
What it does: Burberry is a British luxury brand with outlets across Asia, the United States and Europe.
By Andrew Mackie. Over the past 12 months, the Burberry (LSE: BRBY) share price has fallen nearly 50%, making it one of the worst performers in the FTSE 100. A slowdown in sales growth across the luxury sector has resulted in it issuing two profit warnings in as many months.
To my mind, the market is presenting me with an absolute gift at the moment. The overall luxury market might be depressed at the moment, but I doubt very much that will remain in the doldrums for too long.
The company is in the early stages of a new strategy, one which places its heritage and Britishness at its core. The hiring of a Daniel Lee, as its chief creative officer, is a bold move. But it’s too early to tell if his designs are having the same impact as they did at Bottega Veneta.
Burberry undoubtedly faces some significant headwinds. Demand across the US has fallen, particularly for its lower-priced products. Exchange rate movements have also hurt both revenue and profits.
The mantra of any investor is to buy low and sell high. With so much bad news already factored into its share price, for me it’s a screaming buy. That is why I added some to my portfolio in the last week.
Andrew Mackie owns shares in Burberry.
iShares Oil & Gas Exploration & Production ETF
What it does: Exchange-traded fund aggregating leading global companies in oil and gas exploration and production.
By Mark Tovey. I recently bought shares in iShares Oil & Gas Exploration & Production ETF (LSE:SPOG), an oil and gas ETF. This fund got beaten up last year. That’s despite analysts, like Jeff Currie, a renowned commodities expert, having been bullish on the sector.
So, why didn’t things go as planned for oil speculators in 2023? Well, soaring energy prices and pressure on Western politicians led to a lax approach towards sanctions on hostile countries like Venezuela, Iran, and Russia, and a sidelining of stringent environmental policies for a more “drill baby drill” approach.
However, according to Currie, with inflation falling back to targets, those factors from 2023 are unlikely to repeat. Instead, politicians are likely to pivot back to green policies and cut links with hostile regimes. At the same time, historic underinvestment in oil and gas means continuing supply constraints.
One risk of buying SPOG shares is that oil and gas prices depend on global economic growth, and a worldwide recession would hit the industry hard.
Mark Tovey owns shares in iShares Oil & Gas Exploration & Production ETF.
J.D. Wetherspoon
What it does: J.D. Wetherspoon owns and operates a chain of UK pubs known for their cheap prices to customers.
By Stephen Wright. Right now, J.D. Wetherspoon (LSE:JDW) is my best British stock for February. I’ve been buying shares in the company in January and I’m looking to continue doing so this month.
Higher inflation in November isn’t good for the company and is an ongoing risk with the stock. Even if it’s mostly tobacco, anything that makes the cost of living more expensive is bad news.
Despite this, Wetherspoon just announced some decent trading results. Over the last six months, sales were up 10%, meaning 8% sales growth over the last year.
This indicates that the business is resilient. And I’m expecting it to remain that way for some time, which is why I’ve been buying the stock.
To be honest, I wish I’d bought it when I first had the idea – when the share price was around £5.50. But at £8.30, and with the business showing strength, I think there’s still value here.
Stephen Wright owns shares in J.D. Wetherspoon.
SThree
What it does: SThree is a recruitment business specialising in STEM sectors – science, technology, engineering and mathematics.
By Roland Head. Recruiter SThree (LSE: STEM) reported a drop in activity last year, reflecting a wider market slowdown. Its share price is down by a third from the highs seen in 2021, but I think this is likely to be a buying opportunity.
I reckon SThree’s STEM focus should mean that demand bounces back quickly, supported by long-term growth trends. As far as I can see, the world is not likely to stop needing more well-qualified scientists, programmers, engineers, and mathematicians.
Of course, there’s a risk that demand will weaken further before it starts to improve. I can’t be sure.
However, SThree’s share price slump has left the stock trading on just 10 times earnings. There’s also net cash on the balance sheet, and a well-supported 4% dividend yield.
Earnings are expected to be flat this year before a gradual recovery. I think this could be a good time to buy.
Roland Head does not own shares in SThree.
