Crackdown

In 2016, Chancellor George Osborne unleashed a three-pronged tax attack, and the fairytale came to an end. Some people may still make money out of it, but it is a lot harder than it was. You still have all the bother of buying a property, paying stamp duty (plus that 3% surcharge), doing it up, sourcing tenants, taking deposits and following regulations, only to pay punitive levels of tax on whatever profit you can squeeze out.

I would rather buy stocks and shares, which can be traded in seconds rather than months, with all returns tax-free through the annual £20,000 Stocks and Shares ISA allowance.

Global property play

You could even invest in the property market by purchasing a stock like international estate and lettings agents Savills (LSE: SVS). Launched in 1855, it now has global clout with 600 offices across the Americas, Europe, Asia Pacific, Africa and the Middle East.

As my colleague Roland Head recently pointed out, it operates at the higher end of the market, which can be more robust, and diversifies your exposure to property markets far beyond the UK.

The Savills share price has enjoyed a storming year, growing 30% since January, helped by the wider stock market recovery. Despite this it still trades at just 12 times forward earnings.

Cheaper money

Savills may also benefit from falling interest rates, with markets now expecting US Federal Reserve to cut interest rates in July and possibly September as well. This is part of a global trend, with Australia, Chile, New Zealand and India all cutting this year, and the European Central Bank and Bank of England increasingly dovish.

While it’s worrying that the global economy cannot afford more expensive money, this should help prop up property prices, and underpin Savills’ revenues. Savills stock currently yields 1.8% a year too. Could be worth a look.

Viva Aviva!

I’m a long-standing admirer of FTSE 100 insurance giant Aviva (LSE: AV), which also has indirect exposure to the UK property market via its equity release lifetime mortgages arm. Its main focus is on selling life, pensions, health, general insurance and investment products to millions of customers across the UK, Ireland, France, Poland, Italy, Canada and Singapore.

Just 48% of its business is focused on the UK, which gives it some Brexit ballast. It should also give your portfolio a handy income injection, with a dividend yield of 7.7% covered 1.9 times by earnings and backed by cash flow.

Turnaround Tulloch

New boss Maurice Tulloch disappointed investors in March by tying future payouts to underlying growth rather than paying a fixed ratio, while no share buy-backs are expected this year. However, he is working hard to overhaul the group in order to simplify its structure and strip out underperforming areas, which should boost Aviva stock in the longer run.

Aviva’s share price has underwhelmed, but it is up 12% over the last three months and looks dirt cheap trading at around seven times earnings. I’d buy it over a buy-to-let property.

The post Forget buy-to-let! I’d buy the Aviva share price and this FTSE 250 growth stock appeared first on The Twelfth Magpie.

More reading

• A £10,000 ISA buys 1,931 shares in these 6.5%+ yielding dividend stocks!
• 3 top passive income shares to consider with dividend yields above 5%
• How much do you need in a SIPP to target a stunning £750.75 weekly passive income?
• How to turn a £20k ISA into a £12,000 yearly second income
• Starmer resigns as PM — what could this mean for UK stocks and the FTSE 100?

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

To try and solve this problem, I’ve selected two companies that provide essential services to the markets they serve. This is similar to the ‘picks and shovels’ approach favoured by some mining investors — you don’t know which miners will strike gold, but you do know that they’ll all need the same tools.

To make sure both companies still have some room to grow, I’ve chosen them from the mid-cap FTSE 250 index, rather than the big-cap FTSE 100. But I’ve also chosen companies that are already fairly large, with good market share and solid finances.

Testing is guaranteed

I think we can be certain that mobile and wired communication networks will continue to be an essential part of modern life. That’s why my first pick is FTSE 250 firm Spirent Communications (LSE: SPT).

This £930m company specialises in providing testing, assurance, security and analytics services for network operators. Customers include mobile networks, corporate IT departments and the automotive sector.

In my view, this business that can only become more essential as network technology continues to develop. I think the main challenge for Spirent is simply to make sure it stays in tune with changing requirements. So far, the company has managed well. Major areas of demand at the moment include 5G mobile network assurance, Gigabit Ethernet testing and GPS positioning products.

The shares trade on 18 times 2019 forecast earnings and offer a 2.6% dividend yield. That’s not cheap, but Spirent enjoys double-digit profit margins and ended last year with $121m of net cash — roughly two years’ profits.

I think there’s a chance Spirent will be acquired at some point in the future. But if it isn’t, then I expect it to continue the profitable expansion we’ve seen in recent years.

Beat the property cycle

Property is one of the oldest business sectors around, but it’s heavily prone to boom and bust cycles. That’s not ideal for a long-term investment. To get around this, I’ve selected a firm that’s exposed to more than one geographical market and more than one type of property.

The company I’ve chosen is Savills (LSE: SVS). This 160-year-old business describes itself as an “international real estate advisor.” I’d call it an estate agent or property broker, but it’s fair to say the company does a lot more than this too.

One attraction for me is that the firm is active in both residential and commercial property. Savills also tends to operate at the upper end of the market, which typically bounces back from recessions more quickly.

Only half the group’s profits come from the UK. Last year, nearly 40% of its £144m underlying profit came from the Asia Pacific region, with the remainder split between North America and the Rest of the World.

The shares haven’t escaped the general nervousness surrounding the UK property market. But they’ve done better than many locally-focused rivals and have only fallen about 5% over the last year. Trading on 12 times forecast earnings and with a well-supported 3.6% dividend yield, I think Savills could be a good long-term buy.

The post 2 FTSE 250 dividend stocks I’d buy and hold until retirement appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

Roland Head has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

It’s easy to see why. Landlord costs are rising. Mortgage tax relief is being cut. And the outlook for the housing market is uncertain, despite high house prices.

I believe there are much better opportunities in the stock market. Today, I want to highlight one stock I think could be the best single way to profit from property.

A global player

International real estate advisor Savills (LSE: SVS) is no ordinary high street estate agent. Last year, its revenue rose by 10% to £1,761m, generating an underlying pre-tax profit of £143.7m. In my view, this business has three features which could make it a best-buy opportunity for property investors.

One attraction is the group’s geographic diversity. About 38% of this revenue came from the UK, with a further 33% from the Asia Pacific region. The remainder was split between North America and Europe and the Middle East. This diversity means profits should hold up quite well in the event of a domestic downturn.

A second point is that the group operates retail and commercial property markets, as well as in residential property. So sales volumes aren’t dependent on one single sector of the market.

Finally, Savills also offers a range of so-called non-transactional services such as investment management and property management. These don’t depend on property sales, so they generate income even during quieter periods.

A 1,300% winner

Long-term investors have made a lot of money from Savills. The shares have risen by 1,300% over the last 20 years. That’s an average growth rate of about 14% per year, well above the wider market.

Although the dividend was scaled back during the financial crisis, the current dividend of 31.2p per share is 440% more than the 5.75p payout in 1999.

Chairman Nicholas Ferguson has warned of an uncertain outlook for 2019. But results for the year are still expected to be in line with market forecasts. These price the stock at 12 times forecast earnings, with a 3.6% dividend yield.

I think Savills looks a decent buy at this level. I see this as a business to buy for the long term, with a view to averaging down during the next property downturn.

An alternative property play

Another property stock that’s impressed me is AIM-listed Watkin Jones (LSE: WJG). This £565m firm specialises in developing and managing build-to-rent developments and student accommodation.

Both types of property are in strong demand from institutional investors. Earlier this week the company announced that it had pre-sold a 599-bed student development in Wembley for £90m, even though it won’t be ready for use until 2021.

Once it’s complete, Watkin Jones will manage the property for the new owners, generating a further income from this project.

In my view, businesses like this look more attractive than some housebuilders and much more attractive than buy-to-let. Last year, saw the firm report a 20% increase in revenue and a 26% increase in pre-tax profit. Although earnings growth is expected to slow this year, I think the 3.7% yield provides a good starting point for investors. I’d keep buying.

The post Forget buy-to-let. This property stock is my best buy instead appeared first on The Twelfth Magpie.

More reading

• Penny shares: will these micro-caps double my money in 2026?

Roland Head has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Just right

The £1.3bn company, created in 2016 by the merger of advisory firms Just Retirement and Partnership, was previously hit by a dip in equity release lifetime mortgage sales, despite a booming overall market. Today group CEO Rodney Cook reported a 35% increase in operating profit, “driven by our focus on profit over volume and by our relentless pursuit of merger synergies”.

Statutory net profit rose 4.73% to £155m year-on-year, while new business profit of £170m was up 37% on 2016. New business margins hit 9%, up from 6.8%, reflecting pricing discipline and merger synergies. Just is also working on improving its capital structure and financial flexibility, arranging a new banking facility, putting its new investment grade credit rating to work, and issuing a £230m Tier 3 bond on attractive terms, boosting its capital strength.

Retirement income

The board proposed a final dividend up 6% to 2.55p, making 3.72p of total dividends for the year, also up 6%. Cook said this reflects the group’s confidence for 2018. I am delighted by today’s positive results, since I recently named it one of my top stock picks for 2018. It still trades on a forecast valuation of 9.4% for 2018, with an anticipated yield of 2.7%, covered 4.2 times.

City analysts are forecasting 20% growth in earnings per share (EPS) this year, and another 12% in 2019. The equity release and at-retirement market is growing rapidly, as the nation gets older and the state struggles to keep up. A good home for your money.

Bricks and mortar

International real estate advisor Savills (LSE: SVS) has issued its preliminary 2017 finals today and a share price rise of just 0.36% suggests markets are satisfied, if hardly ecstatic. 

Today saw plenty of positives, including an 11% increase in group revenue to £1.6bn, and a 3.5% rise in underlying profit to £140.5m. The total dividend for the year rose 4% to 30.2p per share. Savills benefited from a resilient performance by its UK residential business, strong commercial markets and its geographical diversity, with an international network of more than 600 offices generating 61% of its revenues.

Property problems

It also reported a solid start to 2018 then dampened expectations by saying that these positive results must be set against “the backdrop of heightened market uncertainty, geopolitical risks and rising interest rates”. It warned of a tempering of strong recent transaction volumes in some markets but at this early stage, its expectations for 2018 remain unchanged. Given this proviso, maybe you would be prefer to spread your bets with these two investment trusts.

Economic and political uncertainty is a worry for every business, but property is particularly exposed after the strong rises of recent years. Today’s figures show underlying growth declining to 5% to 75.8p, while the City is pencilling in 2% for 2018 and 6% for 2019, solid but slower than before. The forecast yield is 3.2%, covered 2.3 times. A forward valuation is 13.6 times earnings seems fair. Savills’ prospects look solid, if not spectacular.

The post 2 bargain growth stocks I’d consider buying with £2,000 today appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

The two companies I’m looking at today have both doubled over the last five years, and have consistently generated value for shareholders for at least 10 years.

Safer than houses

I wouldn’t normally consider an estate agency group as a long-term buy-and-hold stock. But I think that “international real estate advisor” Savills (LSE: SVS) is a bit different, thanks to its international reach and its upmarket focus.

Prime real estate has long been one of the top choices for wealthy individuals who want to invest and preserve their cash. Dips in the market may hit profits sometimes, but this sector of the market has always bounced back strongly. I don’t expect this to change in my lifetime.

Beating expectations

Today’s trading statement from Savills suggests that the group is continuing to trade well at home and abroad. The company says it enjoyed a strong finish to 2017 in the UK and in “a number of Asian and European markets”. Profits for the full year are now expected to be ahead of expectations.

The share price reaction to this good news has been minimal, perhaps because longstanding chief executive Jeremy Helsby chose today to announce his retirement. I don’t think this should be too much of a concern. Mr Helsby will stay until the end of 2018, when he’ll be replaced by the firm’s UK & Europe CEO, who has already spent 21 years at Savills.

Why I’d buy

The stock has extra appeal to me because its earnings have historically been matched very closely by free cash flow. This funds sustainable dividends and allows the group to maintain a net cash balance.

No new figures were provided this morning, but I’d expect today’s upgrade to add at least 5% to consensus forecasts, giving earnings of perhaps 73p per share. That puts the stock on a forecast P/E of 13.3, with a prospective yield of about 3.2%. In my view, Savills remains an attractive long-term buy.

The ultimate defensive stock?

I can’t think of many consumer products which are more defensive than soft drinks and Robinsons squash. But sales of these boring products combined with overseas expansion have helped Britvic (LSE: BVIC) to double its profits and its share price since 2012.

The company is currently two years into a three-year programme to restructure its UK manufacturing and warehousing facilities. This should cut costs and allow the firm to make products in “a broader range of pack sizes and configurations”, which is expected to provide new selling opportunities.

This investment programme has pushed up net debt from £338m to £592m and sapped the firm’s free cash flow. But this situation should start to return to normal next year. I’m prepared to trust that management is continuing to follow the same growth formula that’s driven its success over the last decade.

Britvic stock currently trades on a forecast P/E of 15, with a prospective yield of 3.4%. Given the firm’s track record of growth, I believe this could be a good entry point for a long-term holding.

The post 2 double-bagging dividend growth stocks that could help you retire with a million appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

Roland Head has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Britvic. 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 slowdown in transactions has hit estate agencies hard with likes of Foxtons and Countrywide losing more than a quarter of their value over the past 12 months. However, international property remains a highly desirable asset for investors and Savills (LSE: SVS) is one of the most trusted names in the business.

Today the company reported its results for the half year ending 30 June 2017, revealing a 15% increase in overall group revenues and 12% increase in underlying profits. Group profit before tax increased 27% year-on-year and underlying basic earnings per share rose 18% to 25.7p. Revenue expanded across all divisions with the group’s investment management arm showing the strongest growth, reporting a revenue increase of 22%. Property management revenue and consultancy revenue grew 13% and 15% respectively. Transaction revenue rose 15% reflecting “strong performances in Asia, Europe and the UK Commercial market offsetting a slight decline in UK Residential revenue.”

Sector champion 

Savills is a standout performer in the UK property industry. As other companies have suffered, shares in the group have added 36% excluding dividends over the past 12 months. 

Management is looking to expand the firm’s presence overseas, to reduce the dependence on UK markets, recently acquiring Spanish real estate advisory firm Aguirre Newman SA for €67m. 

Property is a relatively safe asset and Savills’ reputation, coupled with the company’s international presence gives it a safe, defensive nature. Based on current City estimates for the full year, shares in the property group are currently trading at a forward P/E of 13.6, falling to 12.8 for 2018, and support a dividend yield of 3.3%.

Explosive growth 

If Savills is not for you, Burford Capital (LSE: BUR) has some hallmarks of another relatively ‘safe’ growth investment for your portfolio. 

Burford is a finance and investment management firm focused on law. Offering litigation around finance, risk management and asset recovery, the company operates in an ever-growing legal services market where profit margins are wide, and returns are almost guaranteed. The firm recently reported its best ever first half, with profit for the period exceeding that of the full year 2016. 

Operating profit rose 151% for the period, and pre-tax profit leapt 170%. Also, Burford’s record of being able to achieve steady returns for investors in its credit-based funds helped the company win record levels of new commitments for investments of $488m. 

It’s hard to believe that just eight years ago Burford was a startup worth only £80m. Today, the group has a market capitalisation of £2.3bn. For the full year, City analysts have pencilled in earnings per share growth of 70% to 68.8p and based on this, shares in the company are trading at a forward P/E of 13.3, a multiple that seems to undervalue Burford’s prospects. 

The one downside is that the shares only support a dividend yield of 1%, but as the payout is covered more than seven times by earnings per share, I would not rule out further dividend growth in the years ahead.

The post 2 ‘safe’ growth stocks for enterprising investors appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Improving performance

Rightmove’s first half of the year was yet another positive one for the business. This came at a time when the backdrop to the UK property market was highly uncertain. The volume of houses listed in the UK continues to come under pressure, while house price falls may cause some buyers to wait for potentially cheaper prices further down the line.

Despite this, the company recorded a rise in revenue of 11% versus the prior year. This was driven by continued growth in its Agency and New Homes businesses. Underlying operating profit rose by the same amount as sales, while interim dividends per share moved 16% higher.

Part of the reason for the success of the business during the six-month period was record customer numbers, with Agency and New Homes customers up 237 since the start of 2017 to 20,358. Rightmove also remains the dominant player in the industry, with a third more UK residential properties advertised on its site versus the next biggest portal. Traffic growth to the website has also been strong, with it rising 3% versus the prior period.

Investment case

In the last five years, Rightmove has been able to grow its bottom line at a double-digit pace on an annualised basis. This shows the level of consistency which the company offers, and this is forecast to continue into the next two years. In the current year, growth in earnings of 10% is forecast, with this figure due to increase to 11% next year. This is around 50% higher than the wider index’s expected growth rate.

While the company currently trades on a price-to-earnings growth (PEG) ratio of 2.2, its consistency and relatively low risk profile mean it could offer capital growth potential. Its stock price is 172% higher versus five years ago, and more index outperformance could be ahead in the long run.

Another opportunity

Also offering upside potential within the property industry is estate agency Savills (LSE: SVS). The company has recorded double-digit earnings growth in each of the last five years and while its forecasts could be downgraded over the medium term, it has a strong position within its key markets.

Savills trades on a price-to-earnings (P/E) ratio of 13.6, which seems to suggest fair value for money at the present time. Its dividend yield of 3.3% is well-covered at 2.2 times, which indicates dividend growth could be brisk in the long run. This mix of income, value and growth potential means that the stock could be worth buying right now. Certainly, volatility and instability may be present in the short run as UK property prices are falling. But this could equate to an attractive buying opportunity.

The post Why Rightmove plc could be a terrific stock for savvy growth seekers appeared first on The Twelfth Magpie.

More reading

• This FTSE 250 stock could storm back into the FTSE 100 with an 80% rise, 1 broker says

Peter Stephens has no position in any shares mentioned. The Motley Fool UK has recommended Rightmove. 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.

The company announced that group revenue skipped 13% higher during 2016, to £1.45bn, a result that helped pre-tax profit rise 1% to £99.8m.

Chief executive Jeremy Helsby commented that “we entered 2017 with a continuation of global macro-economic concerns, rising bond yields, uncertainty over the impact of Brexit negotiations in the UK and Continental Europe and a new administration in the US.”

Reassuringly he added that Savills has “started the year well and our expectations for the full year remain unchanged.” But I’m not so upbeat on its prospects. Brexit-related tensions will rise in the months ahead and I believe the agency may come under pressure as homeowners become increasingly reluctant to put their properties on the market.

And more specifically, Savills may also be struck by extra cooling in the hothouse London homes market.

A steady record of double-digit earnings growth has seen Savills emerge as a strong growth dividend bet over many years. But with the bottom line anticipated to slow markedly looking ahead — expansion of just 1% is pencilled-in for 2017, for instance — I reckon shareholder rewards could also come under pressure.

A dividend of 29p for last year is anticipated by the number crunchers to advance to 29.7p in 2017, yielding 3.4%. But in my opinion, the possibility of pressure mounting on the listings market this year and beyond puts Savills’ progressive dividend policy on uncertain footing.

Tune out

I am also less than convinced by the earnings outlook over at Dixons Carphone (LSE: DC) as retail conditions look set to become ever more tough.

The toll of Brexit continues to cast a pall over the high street, heavy sterling weakness since June’s referendum steadily pushing up prices for UK consumers. The latest CPI survey showed inflation hitting a three-and-a-half-year high of 2.3% in February, up from 1.8% the prior month and sailing above broker forecasts.

Retail activity is already on the back foot, latest British Retail Consortium numbers showing non-food sales in Britain falling 0.4% in the three months to February. This is the first such quarterly fall since November 2011, and bodes particularly badly for Dixons Carphone and its high-priced gadgets.

The City expects the retailer to generate earnings growth of 6% and 4% in the periods to April 2017 and 2018 respectively, and thus keep its progressive dividend policy in business. Indeed, payouts of 10.7p and 11.2p per share are pencilled-in for this year and next, up from 9.75p in fiscal 2016 for figures that yield 3.5% and 3.7%.

However, I reckon payouts could come under significant pressure from next year onwards should, as is quite possible, Dixons Carphone’s revenues head significantly lower. I reckon cautious investors should give the company a miss at the present time.

The post 2 growth dividend stocks I’d definitely avoid appeared first on The Twelfth Magpie.

More reading

• Up 3.5% this month, is it time for UK investors to cycle back into the more domestically-focused FTSE 250 index?

Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Poor performance

Reporting on Thursday was the UK’s largest integrated property services group, Countrywide (LSE: CWD). Its revenue increased marginally in 2016, but its profitability recorded a steep decline, as challenging trading conditions took their toll. Operating profit fell from £53.8m in 2015 to £28.9m in 2016, while pretax profit was 59% lower at £19.5m. The company cancelled its dividend for 2016 and now intends to pay out between 30% and 35% of earnings to shareholders each year. As such, it is unsurprising that its shares have slumped by 52% in the last year.

A new strategy

In response, Countrywide has sought to strengthen its business. On Thursday, it announced a successful placing of 9.99% of share capital in order to bolster its balance sheet. This seems to be a logical move, given the uncertainty faced by the sector. In addition, it is implementing key cost initiatives to boost margins and future profitability. The company is also seeking to improve its customer offer in order to remain competitive in what is likely to become an increasingly overcrowded marketplace.

Looking ahead, Countrywide is forecast to record a fall in earnings of 4% this year. While disappointing, it is expected to recover somewhat in 2018 with growth of 16%. Assuming it meets these forecasts, its price-to-earnings (P/E) ratio could be as low as 8.3 by the end of 2018. On an absolute basis, that is clearly exceptionally low. When compared to the company’s average P/E ratio of 16.2 over the last three years it suggests there is major recovery potential on offer over the long run.

Sector potential

Of course, Countrywide isn’t the only company in the property sector with recovery potential. Premium estate agent Savills (LSE: SVS) is expected to record a rise in its bottom line of 2% in 2017 and 7% in 2018. And while its shares currently trade on a P/E ratio of 13.2, this is lower than their historic average of 13.8. As such, there is scope for an upward re-rating over the long run.

Savills could benefit from weaker sterling. It may eventually lead foreign investors to resume their purchases of prime London property. While this may not occur in the near term, for long term investors the chances of this taking place seem fairly high. After all, London remains one of the most popular cities in the world, and this status is unlikely to be significantly altered by Brexit. As such, buying Savills could be a sound move. However, Countrywide could be an even more enticing investment for the long run.

The post This could be the best recovery stock ever appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Britvic advised that group revenues rose 4.3% between October and December to £351m, with revenues growth across all of its main markets. Although market conditions remain difficult, it was able to beat the wider market thanks to the strength of labels like Pepsi Max and 7UP.

And massive recent investment in its overseas operations are also powering the top line. Sales in the fast-growing Brazilian marketplace jumped 7.9% in the quarter, for example, while the roll-out of Fruit Shoot in the US proved pivotal in driving sales at at the broad International division leap 19.8%.

These measures are setting Britvic up for exceptional long-term earnings growth. So while a 3% earnings dip is predicted for the 12 months to September 2017, I reckon a subsequent P/E ratio of 13.1 times is a decent level for patient investors to buy-in at.

Hold

A less-than-stellar trading update saw pooch palace Pets At Home’s (LSE: PETS) share price tip to its cheapest since November 2015 last month.

The company saw like-for-like sales of animal merchandise, from collars to cat food, falling 0.5% during the three months to January 5. But a growing presence in the rapidly-expanding services sphere is paying off handsomely, and revenues across its veterinary care and grooming arm grew 7% in the period. And further investment here could keep the top line on an upward slant.

The City expects Pets At Home to endure a 1% earnings downtick in the year to March 2017 before the firm gets back into positive territory from next year. Although increasing pressure on consumers’ wallets could put paid to such hopes, an unassuming P/E ratio of 13.1 times could tempt glass-half-full investors to buy-in on the back of the firm’s ambitious growth plans. I reckon Pets At Home may be one to hold onto for the time being.

Sell

I’m far less enthused by the investment outlook of Savills (LSE: SVS) however, as the London property market cools.

Indeed, the estate agency warned this month that “in the current year, against the backdrop of heightened uncertainty over global economic prospects, geopolitical risks and rising bond yields, we expect a tempering of the strong transaction volumes of recent times in many markets.”

While I remain bullish over the health of the broader UK property market, I believe the electric price rises seen in the capital in recent years could now prompt a heavy reversal as Brexit negotiations and broader economic troubles whack buyer confidence.

Savills upped its full-year expectations for 2016 in January thanks to a strong end to the year. But I believe a subsequent leap in investor appetite — the property play charged to one-year peaks following last month’s update — could spell trouble.

And while the City expects earnings at Savills to edge 2% higher in 2017, I reckon this reading is in severe danger of being downgraded as the year progresses, making a low P/E ratio of 12.1 times somewhat redundant.

The post One FTSE 250 value stock I’d buy, one I’d hold, and one I’d sell appeared first on The Twelfth Magpie.

More reading

• Should I buy this dirt cheap stock to start earning passive income?

Royston Wild has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Britvic. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.