Rupert Hargreaves: Aveva
Holding company Aveva (LSE: AVV) has produced outstanding returns for its investors over the past decade. Since the beginning of 2010, the stock has returned 16.8% per annum, outperforming the FTSE 100 by 9.3%.
It looks as if this trend is going to continue. City analysts are forecasting earnings growth of 194% for 2020, and growth of 12% for 2021. These estimates put the stock on a 2021 P/E of 38.1.
This multiple might appear expensive at first, but because Aveva’s engineering and process management software provides critical services for the company’s customers, I think it is a premium worth paying. Customers tend to stick with the group for years as the cost of switching providers is just too high, and the risks are too great, which gives Aveva a substantial competitive advantage.
Fool contributor Rupert Hargreaves does not own shares in Aveva.
Roland Head: Barclays
The Barclays (LSE: BARC) share price is finally showing some momentum, after years of underperformance. But I believe this FTSE 100 bank remains cheap by most standards.
The shares offer a forecast dividend yield of 5.3% for 2020 and trade on less than eight times forecast earnings. Value investors might also be interested to note that the last-seen share price of c.180p represents a 30% discount to the bank’s tangible book value of 274p per share.
I expect Barclays shares to move closer to their book value in 2020 as trading continues to improve. I rate this unloved bank as a buy for value and income.
Roland Head has no position in any of the shares mentioned.
Andy Ross: AstraZeneca
Ahead of full year results coming out in February I think investors might pile into the high-flying pharmaceutical giant AstraZeneca (LSE: AZN). The share price did well in 2019 and investors will be expecting a positive update from the company.
The series of positive drug pipeline updates in 2019 seems unlikely to reverse anytime soon with new drugs being approved in China and the US in December.
With 164 drugs in its pipeline and with a strong focus on oncology I expect the group to do well in January and to keep its upwards trend going throughout the year.
Andy Ross owns shares in AstraZeneca.
Royston Wild: Shanta Gold
With gold prices having charged through the psychologically critical $1,500 per ounce marker in chirpy end-of-year business, the stage could well be set for more meaty gains in January, I reckon.
And what better way to play the gold bull run than by buying shares in Shanta Gold (LSE: SHG)? It’s a bullion digger whose share price boomed around 55% in 2019, and yet one whose low forward P/E ratio of 6.8 times still suggests that it’s undervalued.
Shanta Gold isn’t just a play on the strong metal prices of the moment, though, with accelerating production (which was up 15% in the third quarter at 22,726 ounces) giving extra reason for stock pickers to pile in today.
Royston Wild does not own shares in Shanta Gold.
Kirsteen Mackay: Sports Direct
In mid-December Sports Direct (LSE: SPD) shares rose 30% after it published its interim results for the six months to October 27. During this time sales rose 6% in UK sports retail, and 79% in its premium division which includes its House of Fraser stores. Net debt fell by almost 50%.
It also announced it is rebranding its business to Frasers Group (LSE: FRAS) in an effort to appear more upmarket. However, Sports Direct stores themselves will not change their branding. Owner Mike Ashley is also considering a £100m staff bonus scheme for full-time employees.
I think the Sports Direct share price will continue to rise in January 2020.
Kirsteen does not own shares in Sports Direct
Paul Summers: AG Barr
My first pick for 2020 is Cumbernauld-based beverage business AG Barr (LSE: BAG), the owner of brands such as Rockstar, Rubicon and, of course, Irn Bru.
Last year was one those already invested will want to forget. Shares plunged after sales came in lower than expected following management’s decision to raise prices. Having traded sideways for a while now on reduced expectations, however, I’m wondering if a recovery may be on the way.
Admittedly, the shares still aren’t cheap at 20 times forecast FY21 earnings but I think this can be justified based on the fat margins and returns on invested capital Barr has produced to date. A 3.1% yield means holders are being compensated for their patience.
Paul Summers has no position in AG Barr.
Kevin Godbold: Burberry
Branded luxury goods retailer Burberry (LSE: BRBY) has revitalised its product offering since it recruited Riccardo Tisci as its chief creative office in early 2018. New products now account for around 70% of the company’s main-line retail store offering and the response from customers has been encouraging.
Revenue and earnings have been rising, driven by a savvy multi-media campaign. Meanwhile, the company has been rationalising its wholesale operation and refreshing retail stores in “all” major cities. Despite the forward-looking earnings multiple north of 20, I think new energy is infusing Burberry and, given its opportunities to expand in Asia and other countries, I’d buy the shares for January and beyond.
Kevin Godbold does not own shares in Burberry.
Peter Stephens: Bovis
The prospects for housebuilders such as Bovis (LSE: BVS) continue to be relatively robust. High demand for new homes is being supported by government programmes such as Help to Buy that are expected to continue under Boris Johnson’s leadership.
The company is making good progress in improving its build quality and customer satisfaction ratings. Its price-to-earnings (P/E) ratio of 12.4 suggests that it offers a wide margin of safety, while a dividend yield of 7.6% is set to catalyse its total returns. Brexit-related risks may hold back its short-term share price performance, but its long-term outlook seems to be positive.
Peter Stephens does not own shares in Bovis.
Tezcan Gecgil: Mondi
Paper and packaging group Mondi (LSE: MNDI) might be one of the lesser-known FTSE 100 companies. Yet with operations across more than 30 countries and multiple industries, it manages forests, produces pulp, paper and plastic films. And it offers industrial and consumer packaging solutions as well as sustainable packaging products worldwide. For example, in August its ‘SizeMeMailer’ won an industry award for reducing environmental footprint for online shopping.
I’m willing to bet that the growth in eCommerce, especially during the festive period in the final weeks of 2019, will likely benefit Mondi shares in the coming months. The market values the firm at about £8.65bn – a solid market capitalisation. At present, the business provides investors with a robust 3.9% dividend yield and the share price of 1,785p throws up a forward P/E ratio just over 12.
Tezcan Gecgil does not own shares in Mondi.
Edward Sheldon: Tritax Big Box Reit
My top stock for January is FTSE 250 property company Tritax Big Box Reit (LSE: BBOX), which owns a portfolio of strategically-located warehouses that are let out to online retailers.
The reason I like Tritax Big Box is that the company is well placed to benefit from the growth of e-commerce. With more and more consumers shopping online, retailer demand for strategically-located logistics warehouse space is rising, which is good for real estate companies that operate in this niche area.
BBOX shares currently trade on a P/E ratio of around 21 and offer a dividend yield of approximately 4.6%. Those metrics are attractive, in my view.
Edward Sheldon owns shares in Tritax Big Box Reit
Tom Rodgers: SDI
SDI (LSE: SDI) is on a great growth spurt and there’s plenty more upside to come, in my opinion. The Cambridge digital imaging firm posted another stellar set of results in December, with earnings per share up 28%, operating profits 41% higher and overall revenue climbing 42% to £11.45m.
A strong management team are accelerating acquisitions: the £4.3m buyout of profitable gas flow manufacturer Chell Instruments was a particularly sound move to grow earnings in 2020.
A trailing P/E ratio of 34 drops to 27 looking to next year because of these booming earnings and I think SDI will continue to outperform.
Tom Rodgers owns shares in SDI.
Manika Premsingh: Associated British Foods
The FTSE 100 conglomerate Associated British Foods (LSE: ABF) released a positive trading update in early December. For a consumer goods company with significant interest in retail; I think this is a win that can’t be overlooked. While Primark is expected to show a small slip-up for the full year, it’s still expanding internationally.
ABF also expects gains for its food business. But its share price hasn’t responded much to the update; in fact, it rose far more sharply to the election results. I reckon that it will rise further as investors search for bargains at a time when share prices of quality companies have already run up quite a bit in the past weeks, making ABF my top share for January.
Manika Premsingh has no position in Associated British Foods.
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Motley Fool UK 2020