Strong trading

Revenue jumped 19.5% to £135.3m over the 27 weeks to the beginning of August following “strong trading.” As might be expected, a recovery in on-the-go consumption was seen as the UK emerged from its multiple lockdowns. New product launches also appear to have hit the spot. Barr’s Funkin brand of ready-to-drink cocktails logged growth of 150% as well. 

On a statutory basis, pre-tax profit rocketed 378.4% to a record £24.4m. Although this needs to be put in context, I take this as a sign the worst is most definitely over.  

Can this momentum continue?

The £600m-cap thinks it can. According to CEO Roger White, BAG is “on track to deliver strong full-year profit performance, slightly ahead of our 2019/20 pre-COVID level.” That last bit’s important. Beating last year’s numbers shouldn’t be a stretch, considering what was happening at the time. The real test is whether Barr is selling more drinks than it did the year before we were all told to stay behind our doors.

However, it’s the resumption of dividend payments that really makes me optimistic. This morning, it was announced that investors would receive an interim payout of 2p per share. That’s good in itself. However, BAG has also elected to pay holders a one-off special dividend of 10p per share. Such a move suggests real confidence on the part of management.

So why isn’t this growth stock rocketing?

Despite all this good news, shares in AG Barr were barely in positive territory early this morning. One explanation for this is that the company, like many others, is seeing “increased challenges” in its supply chain. Another could be BAG’s reflection that “a number of benefits” that supported profit growth in the first half would not be repeated.

There could be other reasons. Investors may be worried that sales at BAG may soften as the winter months arrive. Even if this isn’t the case, a resurgence in Covid infection levels could impact all stocks. 

For me however, these are short-term headwinds. Moreover, AG Barr’s reassuringly sound finances should allow it to weather any further storms. The £65.5m in net cash now on the balance sheet is just over 115% more than it had in its coffers this time last year.

Top-up opportunity

Having held the shares for a while now, I’m pleased to see that my patience in AG Barr is slowly being rewarded. If anything, today’s muted reaction gives me an opportunity to add more of this growth stock to my portfolio. A valuation of 20 times earnings still doesn’t seem excessive for a robust, quality company selling low-ticket items that people don’t think twice about buying.

I’m not the only one prepared to play the long game. Star fund manager Nick Train is the second-largest holder of the stock via his funds. If that’s not good company, I don’t know what is.

The post 1 UK growth stock to buy now appeared first on The Twelfth Magpie.

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• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
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Paul Summers own shares in AG Barr. The Motley Fool UK has recommended AG Barr. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Here are just some of what I consider to be the Sage of Omaha’s most important lessons.

Know your business

“Never invest in a business you cannot understand“.

Warren Buffett is a fan of sticking to what you know. He only buys stakes in a business if he understands what it does and how it will continue to make money for him in the future. 

The portfolio of stocks owned by his holding company Berkshire Hathaway bears this out. Buffett part-owns giants such as Coca-Cola, American Express and Apple. 

Early in my investment journey, I found it remarkably easy to get involved in things I didn’t understand (or at least didn’t understand as well as other people). Even if I didn’t end up buying shares in these companies, I still wasted lots of time trying to figure out exactly how they would grow my capital.

These days, I do what Buffett does. Throw such stocks in the ‘too hard’ pile. Instead, I hold shares in businesses I can easily summarise, like food-on-the-go retailer Greggs, luxury fashion brand Burberry and drinks firm AG Barr.

Buy quality stocks

“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

If understanding what a business does is vital, so too is knowing how much to pay for its shares. Warren Buffett’s original investment strategy was to buy seriously cheap stocks. Their quality didn’t matter so much if they were so lowly priced. As such, he was confident he could still make money. This focus later changed to buying stocks with strong competitive advantages (or economic moats).

By their very nature, such companies aren’t all that common and are usually more highly valued. So, having found a good thing, Buffett believes an active investor should bet big. If not, s/he may as well track the index.

Learning how to separate the wheat from the chaff takes time. What’s taken me longer however, is recognising that paying up can still work if a company can reinvest and compound earnings for years to come.

Stay the course

“If you aren’t thinking about owning a stock for ten years, don’t even think about owning it for ten minutes.”

With news coming thick and fast every day, there’s a tendency to think that investors need to react to everything. Buffett disagrees. He thinks that inaction is key to growing wealth. This is why he says his favourite holding period is ‘forever’. 

While we shouldn’t take that literally (he still sells), Buffett’s record bears out this ‘buy and hold’ approach. He first began investing in Coca-Cola back in the late 1980s and still holds the stock today. 

Whether I can own stocks for as long as Buffett remains to be seen. However, adopting a ‘don’t touch!’ policy means I’ll definitely save on commission fees. Over time, costs like these actually have a huge impact on returns.

The post How I’d invest using 3 lessons from billionaire Warren Buffett appeared first on The Twelfth Magpie.

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• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

American Express is an advertising partner of The Ascent, a Motley Fool company. Paul Summers owns shares in Greggs, Burberry and AG Barr. The Motley Fool UK owns shares of and has recommended Apple and Berkshire Hathaway (B shares). The Motley Fool UK has recommended AG Barr and Burberry and has recommended the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2023 $265 calls on Berkshire Hathaway (B shares), and short March 2023 $130 calls on Apple. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

“Positive start”

Today’s interim results from Vimto-owner Nichols should provide some comfort to investors. Revenue increased 13.8% to £67.4m over the first six months of 2021, with adjusted pre-tax profit moving almost 32% higher to £8.9m.

Sure, some improvement was expected due to the loosening of restrictions. Even so, news that the company’s Vimto Dilutes range significantly outperformed the UK market between January and June bodes well.

Sales of Vimto have been rebounding overseas too. International growth of 42.3% was recorded compared to the prior year. Sales in regions such as the Middle East (the drink is incredibly popular over Ramadan) appear to have held up well.

And the outlook? Well, Nichols believes that its “positive start” to 2021 should allow it to meet management expectations for the full year. However, I now wonder if the recent weather might lead to a slight increase in guidance next time around.

All told, I’m satisfied with today’s update and would be happy to add to my position today. A good recovery in sales, not to mention a strong balance sheet and solid portfolio of brands (which now includes SLUSH PUPPiE), makes me think this is one of the best stocks to buy now in this space.  

“Better than anticipated” trading

Today’s results from Nichols followed hot on the heels of fellow drinks maker AG Barr. Like the former, Barr has had to contend with the shutdown of the hospitality industry over the pandemic. Like Nichols, the company’s now showing signs of recovery.

Yesterday, Barr announced that full-year profit would now likely be ahead of expectations due to “better than anticipated” trading. This helped its previously-sluggish share price to recapture some of its lost mojo.

Again, I think Barr will do well in time and there’s more upside ahead. It’s another quality operator that’s conservatively run. It also has a good number of ‘sticky brands’ such as IRN-BRU, Rubicon and Funkin. So I’m tempted to continue accumulating the shares.

Sales tailwind

As a holder of both stocks, it’s hard for me to sit on the fence when looking at NICL and BAG. Notwithstanding this, I’m encouraged by recent trading. I also suspect the blazingly-hot summer in their home market will prove a tailwind for sales.

This isn’t to say I shouldn’t be careful. Owning multiple companies in the same sector isn’t without risk. Although no lasting damage appears to have been done, the introduction of the sugar tax on soft drinks a few years ago was proof that even the most defensive companies can face challenges.

Going forward, it goes without saying that Delta infection levels may get so bad that some restrictions may need to be re-introduced. This may hamper demand for both product stocks. 

So long as I keep my exposure in check by investing elsewhere, I think the reward will be worth it if I bought more now. 

The post UK heatwave! Here are 2 of the best stocks to buy now appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers owns shares in AG Barr and Nichols. The Motley Fool UK has recommended AG Barr and Nichols. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

AG Barr

In contrast to other consumer goods stocks, the share price of drinks firm AG Barr (LSE: BAG) is still to see some serious positive momentum. Nevertheless, today’s trading statement does hint that the recovery is getting closer.

This morning, Barr said that trading has been in line with management expectations. That’s comforting considering the UK was in lockdown for the early part of 2021.

As investors might expect, the easing of restrictions and re-opening of hospitality and leisure venues have provided a much-needed boost to sales. This is particularly the case for its Funkin ready-to-drink cocktails business (although people still seem to be consuming these at home). Elsewhere, the launch of new products, such as Rubicon RAW Energy, have been well-received by consumers. 

There were also encouraging noises on dividends. Now, income isn’t a priority for growth investors like me (I simply re-invest what I receive). However, I do use it as a gauge for just how confident management is on future trading. Today, Barr announced it remained committed to restoring cash returns in the current financial year. More news is expected in August.

A forecast price-to-earnings ratio of 22 isn’t initially appealing, especially given the risk of coronavirus infections climbing again. Naturally, any change to Boris Johnson’s roadmap back to normality would not go down well with the market.

Nevertheless, it’s worth highlighting that BAG is still 45% off the valuation it hit almost exactly two years ago. It’ll take a while, but I firmly believe the Irn-Bru owner will fizz in time.

Avon Rubber

A second growth stock that’s still far off previous highs is life-critical personal protection firm Avon Rubber (LSE: AVON). Thanks to the strangely muted reaction to this week’s encouraging interim results, I think there’s still time for investors like me to get involved in this quality company.

According to CEO Paul McDonald, the firm has made a “strong start” to the year. The numbers bear this out. Revenue and adjusted pre-tax profit climbed 41% (to $122m) and 23% (to $16m) respectively over the six months to the end of March. In other news, net debt pretty much halved to just over $44m. The interim dividend was also hiked by 30%.

Perhaps most importantly for would-be investors, Avon said that it was making “good progress” with regard to sorting out the delays in gaining product approval for its body armour programmes. This is partly what caused the shares to dive late last year. 

Thanks to a 46.5% jump in orders, the mid-cap — which will shortly change its name to Avon Protection — thinks it will deliver full-year numbers as expected. Revenue visibility going forward has also been described as “excellent“. That’s more than you can say for other growth stocks. 

Avon is still 35% below the share price high it hit back in December. Again, like AG Barr, I’m not expecting this gap to close overnight. However, I do think those with time on their hands will be rewarded eventually.

The post 2 beaten-down UK growth stocks to buy right now appeared first on The Twelfth Magpie.

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• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers owns shares of AG Barr. The Motley Fool UK has recommended AG Barr and Avon Rubber. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

A UK share ready to fizz

As a holder of the stock, I never expected today’s final results from drinks firm AG Barr (LSE:BAG) to be all that impressive. And so proved to be the case.

Due to the enforced closure of bars and pubs, the producer of thirst-quenching brands such as IRN-BRU and Rubicon has been hit hard by the pandemic. Revenue fell 11.2% to £227m over the 12 months to 24 January. Pre-tax profit also decreased — by 12.3% — to £32.8m (or £26m once one-off costs were deducted). Despite this, there were a few bits of good news.

Partly as a result of steps taken to control costs, Barr ended the year with £50m in net cash. That’s up significantly from the £10.9m logged at the end of the previous financial year. This comforts me. As an investor, I need to know a business I part-own has a sufficiently robust balance sheet to negotiate inevitable periods of ‘sticky’ trading. 

In other news, CEO Roger White said the company had “the clear intention to recommence dividend payments in 2021.” The fact that it hasn’t done so already is actually a positive for me. As nice as dividends are, I don’t want a business showering me with cash until it’s confident in its outlook. 

All told, I’ve no problem staying invested. That’s not to say I expect the share price to motor back to its 2019 high for a while. 

While the lifting of restrictions should be good news for AG Barr, it would be foolhardy to assume there won’t be obstacles ahead. The possibility of a third wave of the coronavirus can’t be ignored. Especially if the vaccine programme runs into trouble.

This is a UK share for the ‘bottom drawer’. 

Sweet treat

Of course, there are other ‘reopening’ options available in the small/mid-cap space. Chocolatier Hotel Chocolat (LSE: HOTC) is another example of one that could do very nicely in time. 

Now, it’s quite reasonable to say that sales of chocolate are unlikely to rocket as we approach summer. This is particularly the case if we get a heatwave! 

As a counter to this argument, I suspect HOTC’s next update on trading could be better than some in the market are expecting. It should, after all, take into account trading in the Easter period. If reports are to be believed, many in the UK are treating this weekend as a second Christmas and spending lots on decorations and, very likely, chocolate eggs.

On top of this, the recent decision by rival Thorntons to abandon its high street stores could prove a boon to the £500m-cap. It should allow HOTC to assume pole position at the luxury end of the UK market.

Like AG Barr, I wouldn’t buy Hotel Chocolat stock if I were only considering holding it for a few weeks or months. Investing requires patience. Trying to predict where a share price will go in the very near term is asking for trouble.

On a mid-to-long-term basis, however, I’m confident these UK shares could do very well for holders.

The post 2 UK shares to buy for the great ‘reopening’ appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers owns shares in AG Barr. The Motley Fool UK has recommended AG Barr. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

What happens next?

Here’s the bad news. Whether markets continue their downward descent in March is pretty much impossible to say. There are simply too many variables involved.

This being the case, it’s vital to separate signal from noise and only use the former to our advantage. In other words, investors need only concentrate on what they know or can control.

What we do know is that markets have always recovered over time… it’s individual companies that don’t. This being the case, it’s surely far more productive to look for high-quality businesses to buy on temporary weakness than it is to fret over whether global markets rise or fall on Monday.  

What do the best UK shares look like?

It’s subjective, of course. Nevertheless, I look to separate the wheat from the chaff using the following checklist. I want companies I invest in to:

• Solve a problem (if it doesn’t, why would anyone buy what it sells?)
• Be profitable (companies actually making money will always be more resilient than those dependent on hype)
• Offer multiple products (one-product companies are risky if fashion/demand changes)
• Generate repeat business (thus allowing me to be more confident on earnings)
• Have low/no debt (allowing a business to survive an inevitable crisis or two)
• Have great returns on capital (it makes lots of money from the cash it invests in itself)

Although there’s no such thing as a perfect company, many of my personal holdings tick many of these boxes. This explains why I’m invested in drinks firm AG Barr, laser-equipment supplier Somero Enterprises, kettle safety firm Strix and comparison website Moneysupermarket.com.  

Slow and steady

Buying even the best UK shares at a time when markets are falling takes guts. This fact is obvious when all is well but it can be hard to remember when the chips are down. 

I’m as susceptible to fear and greed as anyone else. In an effort to counter this, I think the most appropriate response is to adopt a ‘slow and steady’ approach. In practice, this means investing my money gradually. I may not be able to time my purchases perfectly but I’ve never met someone who can. The danger of trying is that the recovery happens before putting any capital to work. Ultimately, I may end up paying more than I wanted to. 

A slow and steady approach isn’t perfect. In theory, the more times I buy, the more commission I will incur. This is a problem since costs can have a huge impact on a portfolio’s performance over time, regardless of how good the actual investments are. One way I work around this is to take advantage of ‘regular investing’ plans that buy on the same date each month, vastly reducing what I pay.

Ignoring the noise, finding the best  UK shares to buy and keeping costs low is no guarantee of success, but it’s how I’m handling this latest market crash. 

The post Why I think NOW might be a great time to buy the best UK shares appeared first on The Twelfth Magpie.

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Paul Summers owns shares of AG Barr, Moneysupermarket.com, Somero Enterprises, Inc. and Strix Group. The Motley Fool UK has recommended AG Barr, Moneysupermarket.com, and Somero Enterprises, Inc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Turnaround potential

Nick Train first purchased shares in Imperial Leather owner PZ Cussons (LSE: PZC) towards the end of 2019. The company’s valuation has climbed roughly 20% since. This morning’s interim results may not have added to the momentum but I do think they’re encouraging considering the troubles PZ has encountered in recent years. These include a challenging economic backdrop in Nigeria (a key growth market) and consumer uncertainty in Europe. 

As a result of the huge demand for hand wash and sanitiser, overall revenue rose 14.6% to just under £313m in the six months to the end of November. Reported pre-tax profit came in at £36.3m — 1.6% lower than over the same trading period in 2019 due to some one-off costs. 

For me, however, one of the big highlights of today’s statement was the reduction in net debt to £18.2m. Back in 2019, it stood at £137.7m. A further positive was the interim dividend being maintained. Yes, a gently rising dividend is preferable. However, I don’t think investors will be too disgruntled by the 2.67p per share cash return. Let’s not forget that many, far larger companies have had to halt their dividend payments entirely.

PZ is not a share for the impatient. In addition to uncertain trading conditions and higher costs, the new management team is also attempting to turn around key brands and simplify operations. This is a multi-year job and goes some way to explaining why the company remains a contrarian pick.

As a committed buy-and-hold investor, however, this is probably what attracted Nick Train. It also chimes with my own Foolish approach to investing, namely holding quality stocks for the long term. I don’t own a slice of PZ Cussons just yet, but today’s news does suggest to me that the worst could be over for those already invested. 

Ready to fizz?

Another one of Nick Train’s favourite UK shares (and mine) is IRN-BRU producer AG Barr (LSE: BAG).

Today, Barr said that revenue for the last financial year would now be somewhere in the region of £227m. That’s less than the £255.7m achieved in FY19/20. Nevertheless, it’s still “marginally ahead” of what the company had expected. Positively, the beverage-maker also thinks pre-tax profit will be higher than analysts had been predicting. 

“So, why aren’t the shares rallying?“, you might ask. Similar to PZ Cussons, at least some of this must be down to Barr’s foggy earnings outlook now that we’re back in lockdown. Talk of restrictions lasting until the summer could also be keeping a lid on investors’ enthusiasm for the stock. 

Not that I — or probably Nick Train — am concerned. Barr has £50m in net cash on the balance sheet. This should be enough to see it through to the other side. 

At 21 times forecast FY22 earnings, the shares aren’t cheap. Then again, this could turn out to be a reasonable price to pay later in 2021. Once the hospitality sector reopens, I think AG Barr could get its fizz back. 

The post I think these Nick Train-backed stocks will rally back to form in 2021 and beyond appeared first on The Twelfth Magpie.

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• After upgraded guidance, is PZ Cussons primed for a FTSE 250 comeback?

Paul Summers owns shares in AG Barr. The Motley Fool UK has recommended AG Barr and PZ Cussons. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

But let’s stay optimistic. Thanks to their ability to rapidly increase revenue and profits, I think there are many small-cap growth stocks whose share prices could really shine. Here are three with strong potential. 

Drink up

Assuming bars, pubs, and sporting venues are allowed to fully open by spring, I think beverage firms such as AG Barr (LSE: BAG) could do well. Drinks companies do have a habit of bouncing back firmly after general market setbacks. This time should be no different.

That’s not to overlook just how hard the last year has been. Revenue and pre-tax profit have tumbled in 2020 due to the incredible headwinds faced by the hospitality sector. I’m also under no illusion that it will take some doing for Barr to recover back to the 950p mark it hit in 2019.

Then again, it’s got a lot going for it. In addition to its flagship IRN-BRU brand, Barr looks financially solid. The business had over £30m in net cash when it last reported to the market.

Although not currently paying out dividends, management does expect cash returns to resume in 2021 too. That’s the sort of bullish talk I like to hear.

Right space, right time

As widely expected, the share price of infection prevention specialist Tristel (LSE: TSTL) has enjoyed an excellent 2020. The £250m business is up almost 40% year-to-date. That’s despite sales being lower in early 2020 due to many operations being deferred by the pandemic.

Positively, CEO Paul Swinney revealed last week that Tristel had seen a “substantial recovery in demand” for its products since October. Pre-Brexit stockpiling by the NHS was a factor.

One reason the shares could continue rising in 2021 relates to the company winning approval from various regulatory bodies. In the US, Tristel has already spoken of “very encouraging progress” relating to its FDA test programme for its ‘Duo for Ultrasound’ disinfectant. Additional positive feedback has come from the Canadian regulator on its ‘Duo for Ophthalmology’ submission. 

Trading at 40 times forecast earnings already, at least some of this potential is already priced in. Even so, Tristel is a highly profitable, niche business with excellent finances. If another market crash presents me with an opportunity to do so, I’m backing the truck up. 

Ready to strike

For those of a risk-tolerant nature, ten-pin bowling firm Hollywood Bowl (LSE: BOWL) could also be worth backing.

While its offering is easily replicated, I think Bowl has a chance of recovering from the pandemic more speedily than, say, the UK’s battered airlines. A few games of bowling is far more affordable to families in tricky times than a holiday abroad. Even those with the means to travel when restrictions lift may adopt a ‘wait and see’ approach.

Only last week, the company reported it had seen “strong customer demand and better than expected performance” when it reopened after the first lockdown. That’s got to be encouraging.

The new tier 4 restrictions won’t help things in the near term. However, this may provide new investors an opportunity to strike on UK shares like this before the real recovery kicks in.

The post 3 UK small-cap growth shares I think could DOUBLE in 2021 appeared first on The Twelfth Magpie.

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• 3 quality FTSE 250 stocks to consider with dividend yields above 4.5%
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• Analysts think this growth share could rally a further 26% in the next year

Paul Summers owns shares of Nichols and AJ Barr. The Motley Fool UK has recommended AG Barr, Hollywood Bowl, and Nichols. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Today, I’m looking at three UK stocks Train continues to back, despite so far struggling to recover since March’s coronavirus-related market crash.

A Train favourite

Its share price may have performed poorly over the last year or so, but Irn Bru maker AG Barr (LSE: BAG) boasts many great business hallmarks. It has strong brands, a robust balance sheet, and generates higher operating margins compared to peers. It also operates in a defensive sector with loyal customers. No wonder Nick Train remains a fan. 

Despite not being immune to the coronavirus, Barr has also been performing fairly well in 2020. Revenue of £113m in H1 may have been down 8% on the previous year due to the lockdown, but it was far better than analysts were expecting. 

The stuttering reopening of bars and cafes in recent weeks means it will take time for sales to really fizz. Then again, the recent heatwave will surely have provided a welcome boost. Indeed, AG Barr could reinstate its dividend in September if management feels another UK lockdown is unlikely.

Like Train, I remain confident the stock will recover in time.

Temporarily depressed

Staying with the drinks theme, FTSE 100 beverage beast Diageo (LSE: DGE) is another of Nick Train’s favourite stocks. It’s the biggest holding in the Lindsell Train UK Equity Fund and the third-largest in both the Lindsell Train Global Equity Fund and Finsbury Growth and Income Trust. 

That said, recent news from the company has been disappointing. Despite many of us drinking from our homes over lockdown, the company still revealed a bigger-than-expected fall in underlying net sales earlier this month. 

The near-term outlook is also pretty gloomy. Confirmation that the UK is now in the first recession for 11 years may force some to curtail their spending on premium label booze for a while. 

Train, however, is staying optimistic. Writing to investors, he said there’s “no doubt that human beings both crave and will return to ‘real’ activities and experiences” once the coronavirus has passed.

Since this will inevitably include going back to pubs and clubs en masse, I think now might be an excellent opportunity to snap up Diageo while its share price is depressed.

Nick Train luxury buy

A third business Nick Train is standing by — and another key holding across funds he manages — is FTSE 100 luxury brand Burberry (LSE: BRBY).

Once again, trading through the pandemic hasn’t been great due to store closures and travel restrictions. Although last month’s update included some green shoots of recovery, the share price is understandably still far below where it stood at the start of 2020. 

As tricky as the current environment is however, I’m confident Burberry can recover. The unstoppable growth in wealth across Asia coupled with the exclusivity of its brand should see to that. In the meantime, the firm is cutting costs where it can and continuing to develop its online offering.

While certainly not a reason to buy the shares on its own, I also suspect Burberry is now a prime takeover candidate.

The post Stock market crash: Nick Train is keeping faith with these FTSE shares, as am I appeared first on The Twelfth Magpie.

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Paul Summers owns shares of Burberry, AG Barr and Lindsell Train Global Equity Fund. The Motley Fool UK has recommended AG Barr, Burberry, and Diageo. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Today, I’m going to cover three purchases I’ve recently made and why. In spite of the likely economic gloom ahead of us, I think all could prove great additions, over time.

ISA having some of that!

The first stock has been on my watchlist forever. Irn-Bru owner AG Barr (LSE: BAG). To be sure, Barr won’t escape the economic impact of the coronavirus lockdown. With pubs, bars and cafes closed, it’s been dependent on supermarket sales to keep going. 

This, however, should prove a short-term blip. The company is sound and has a great portfolio of brands, including Funkin cocktail mixers and Rubicon to support sales of its legendary orange beverage. Returns on capital employed are reassuringly decent and the firm’s balance sheet also looks solid. 

Barr’s stock rarely goes on sale. Having more than halved in value over the last year, however, it’s changing hands for less than its average valuation over the last five years (18 vs 21 times forecast earnings).

No investment is without risk, and current predictions could still prove optimistic. Nevertheless, I suspect the margin of safety is such that now is the time to at least start adding it to my ISA. 

Down but not out

While AG Barr is a new holding, I’ve also been adding to my existing stake in high street baker and FTSE 250 member Greggs (LSE: GRG).

Some may think this a strange choice, particularly if a second coronavirus wave puts an end to the lifting of lockdown restrictions. There’s also a possibility revenue and profits don’t recover as swiftly as first thought, due to the prolongation of social distancing.

But let’s get real. Greggs surely has a better chance of coming out of the coronavirus storm than most on the high street. A firm selling low-ticket baked treats is unlikely to be impacted as much as those selling discretionary items. A new TV or phone purchase can be postponed. I’m not convinced people will apply the same rationale to a steak bake. Now factor in Greggs’ strong brand, history of savvy marketing, and excellent free cash flow.

This is why I expect to continue holding this company in my ISA for many years to come.  

Gaming for growth

A final ISA purchase I’ve made is actually a fund. Notwithstanding this, I do think it could generate returns to rival the stocks mentioned above. 

The VanEck Vectors Video Gaming and eSports UCITS ETF tracks the performance of 25 companies. All derive a large proportion of their revenue from this hot sector. As I’m sure you know, gaming has been immensely popular over the lockdown period.

Although small, the fund is arguably a safer option than buying a single developer. The latter’s fortunes can be highly dependent on only a few titles at any one time. With this ETF, an investor can mitigate that hit-and-miss risk.

At the end of April, the VanEck fund had returned 27.5% since its inception last June. It is, of course, unlikely to deliver this consistently. Nevertheless, the industry’s strong growth prospects make me sufficiently bullish to add it to my ISA. The fund has a total expense ratio of 0.55%.

The post Forget the recession. Look at what I’ve been buying for my Stocks and Shares ISA! appeared first on The Twelfth Magpie.

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Paul Summers owns shares of AG Barr, Greggs and VanEck Vectors Video Gaming and eSports UCITS ETF. The Motley Fool UK has recommended AG Barr. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.