These shares should bring some festive cheer. Experts reveal their top plays for 2016 and beyond
Irish company C&C is a producer of beer, cider and soft drinks. Alex Wright, manager of the Fidelity Special Situations fund, likes C&C for its strong market position, solid plans to expand abroad and the fact the alcohol sector is growing.
“If cider is a drink you will be enjoying over the festive period, the chances are you will be purchasing it from C&C, given it produces Bulmers and Magners,” he says.
“Not only does C&C enjoy high brand loyalty, it’s also a cash-generative company, operating in a market that should see structural growth internationally, including the US, which is growing at a double-digit rate. Moreover, it recently signed a long-term partnership agreement with the world’s largest American-owned brewer for the sale and distribution of its cider brands in the US.
“The stock is trading at a very low valuation given this market environment and management’s continued commitment to more efficient use of the balance sheet. It could also be an attractive takeover target due to its strong brands and the increasing consolidation across the sector.”
Shares in housebuilders including Barratt Homes, Persimmon and Crest Nicholson have done exceedingly well in the last few years.
The UK’s well-documented housing crisis has led the government to come up with a range of schemes to help people buy their own homes – particularly new builds. Help to Buy, FirstBuy and NewBuy have all encouraged the purchase of new builds, which has been a big boost to housebuilders.
Brian Cullen, manager of the SWMC UK fund, says it is tempting to think of housebuilding as a long-term trend from which every company involved in the sector will benefit.
Although he says this is true to an extent, there are some reasons why Taylor Wimpey stands out from its peers. “In terms of valuations, of the bigger housebuilders Taylor Wimpey looks more interesting than the likes of Persimmon.
“In fact, it has pretty much the highest dividend yield in the entire sector at about 7 per cent, which is attractive for a business that has very strong fundamentals.”
National Grid is a particularly good choice for investors looking for regular income payments, says Graham Spooner of The Share Centre. It has a dividend yield of around 4.8 per cent. Analysts also expect the dividend to rise in line with inflation, or even higher.
“It emerged recently that the company would be selling a majority stake in its gas distribution business, with the aim of returning the proceeds to shareholders in 2017,” explains Spooner.
“We have long been fans of National Grid and currently recommend it as a ‘buy’ for income seekers. The eight-year agreement with regulators in 2013 was important and has improved confidence in the group. Moreover, the company continues to see a good level of progress and an improving outlook for its operations in the US.”
BANK OF IRELAND
Ireland’s economy recovered well from the financial crisis and is now surging ahead. It is forecast to grow at 6 per cent this year – that’s three times the European average. The country’s property market is returning to strength too, which should mean more opportunities for market leader Bank of Ireland to lend, says Alberto Chiandetti, manager of the Fidelity European Opportunities fund.
“Having already successfully rebuilt its balance sheet, I think the bank will be able to achieve a higher return on capital than the consensus expects through superior retained earnings.”
JARDINE LLOYD THOMSON
Jardine Lloyd Thomson (JLT) is a specialist insurance broker which caters to the aviation, healthcare and construction industries. Hugh Yarrow, manager of the Evenlode Income fund, likes this company because it has strong relationships with clients and a good reputation, both of which are important for repeat business.
The company has been through a tough few years. Its revenues have been burdened by its investment in a new insurance business in the US, alongside cost pressures from UK regulators. However, Yarrow believes the outlook in the longer term is positive, and the company has a good dividend too.
“JLT is increasing its market share in this downturn, taking advantage of lower insurance rates to increase coverage for clients, and driving growth in new sectors such as cyber insurance,” he says. “Looking ahead, the US business will begin to generate and grow profits. JLT’s annual dividend growth over the last five years has been 7 per cent.”