Every month, we ask our freelance writers to share their top ideas for shares to buy with investors — here’s what they said for October!
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What it does: FTSE 250 member AG Barr produces soft drinks including Irn Bru, plus a range of other branded food and drink products.
By Roland Head. I’ve chosen AG Barr (LSE: BAG) as my best buy for October. The group’s like-for-like sales rose by 10% during the first half of this year, as volumes rose despite price rises.
Barr’s strategy of acquiring faster-growing brands — such as Boost Drinks and Funkin Cocktails — to sit alongside its more mature product lines seems to be working well.
The company’s last set of accounts showed a net cash balance of more than £50m. This provides a useful safety buffer in tough economic conditions. Profitability is also strong, with an operating margin of about 14%.
One possible concern for me is that long-time chief executive Roger White recently announced his retirement after more than 20 years with the business.
Management change is a risk. But with Barr’s shares trading on 15 times earnings and offering a useful 3% yield, I believe they are reasonably priced as a long-term buy-and-hold investment.
Roland Head does not own shares in AG Barr.
What it does: Diageo manufacturers a range of alcoholic drinks including Guinness, Tanqueray and Johnnie Walker.
By John Fieldsend. Diageo (LSE: DGE) shares recently dropped to a 52-week low of only 3,081p. This is down around 20% from the 3,841p share price only a few months ago.
The firm is grappling with challenges, true. The untimely passing of CEO Ivan Menezes in June was tragic and a huge blow for the firm. A new CEO has been appointed but there will be uncertainty going forward.
The ongoing legal battle with US rapper Sean Combs is another. The firm were dealt a blow on 8 September when a US court opted not to dismiss the lawsuit.
Despite all this, I see the drop in shares as an opportunity. Diageo has an excellent track record exemplified by its 25-year streak of raising its dividend payment.
The shares just look too cheap to me. I’ll be opening a position soon.
John Fieldsend does not own shares in Diageo.
What it does: Halma is a group of roughly 45 companies that provide products and services designed to address pressing issues faced by the world.
By Paul Summers. The share price of life-saving technology company Halma (LSE: HLMA) has been in poor form for a while and recently set a new 52-week low. I maintain the stock looks oversold.
That might seem a strange thing to say considering the global economy is stuck in the mud and the shares still trade at 24 times forecast earnings at the time of writing.
For me, however, Halma’s quality justifies a higher-than-average price tag. Given the need to address climate change, reduce waste and pollution and meet healthcare demand, its growth strategy is clearly sustainable. Margins are also reassuringly high and the balance sheet looks strong.
A dividend yield of just over 1% won’t grab the attention of income investors but a 5%+ hike to the total dividend every year for the last 44 years should be applauded.
I fully expect the shares to bounce back in time.
Paul Summers does not own shares in Halma
Scottish Mortgage Investment Trust
What it does: Scottish Mortgage Investment Trust is one of Baillie Gifford’s flagship funds, with over £13bn in assets under management.
By Charlie Keough. It was only a few years back we saw Scottish Mortgage Investment Trust (LSE: SMT) hit an all-time high. However, today it’s lost over 55% of its value. Despite its poor performance, I think October could be a smart time for investors to consider buying the shares.
Firstly, with it trading at a near 20% discount to its net asset value, I sense the opportunity to snap up high-quality companies trading cheaply. Scottish Mortgage holds names including Tesla and Amazon. And while these stocks have suffered due to inflationary pressures, I think the long-term outlook remains positive.
What’s more, I’m also a fan of the diversification Scottish Mortgage offers my portfolio, as this mitigates risk. Gaining access to unlisted shares, including exciting companies such as SpaceX, is an added bonus.
With the trust being home predominantly to growth stocks, rising interest rates have seen it suffer in recent times. This could continue in the months ahead.
However, as a long-term investor, this doesn’t bother me. I’ll most certainly be tracking the stock’s performance this month.
Charlie Keough has no position in any of the shares mentioned.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended A.g. Barr P.l.c., Amazon.com, Diageo plc, Halma Plc, and Tesla. 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.
Motley Fool UK 2023