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Top British stocks for July 2020

The Motley Fool Staff
Girl and father putting coin into piggy bank, sitting on sofa at home

We asked our freelance writers to share the top British stocks they’d buy in the month of July. Here’s what they chose:

Kirsteen Mackay: Crest Nicholson 

I think Crest Nicholson (LSE:CRST) shares will rise again in July as UK lockdown restrictions are further eased and the construction sector resumes. The stock has endured a difficult few months and its share price reflects this.

Its half-year report showed the extent of the pandemic’s impact, with a £51m loss and 130 job cuts. However, it also showed signs of encouragement as it streamlines and forges ahead with a new strategy.

Covid-19 continues to pose a risk to the UK housing market, but Crest is confident it can return to profit by the end of the year.

Kirsteen does not own shares in Crest Nicholson.

G A Chester: National Grid

Annual results from National Grid (LSE: NG) a couple of weeks ago confirmed its status as one of the most reliable businesses in the market. In line with its longstanding policy, the Board increased the dividend by RPI inflation — 2.6% on this occasion. The running yield is now 5%.

The dependable dividend, with its tasty yield, is one reason I’ve made the stock my top British stock for July. Another is that the company expects short-term, Covid-19-related impacts on earnings and cash flows to be ultimately recoverable under regulatory mechanisms. As such, the directors “anticipate limited economic impact longer term”.

G A Chester has no position in National Grid.

Jonathan Smith: JD Sports Fashion

The JD Sports Fashion (LSE: JD) share price may be below where it started the year, but it has more than doubled since the March sell-off. The position it has in the sector as one of the largest players could help going forward from acquiring smaller firms. 

Investors have shrugged off the blocked buyout of Footasylum, as the strategy behind it of buying firms to grow is a sensible one. With JD now opening up stores, along with a strong online presence, the impact of the virus on business is hopefully past the peak.

Jonathan Smith does not own shares of JD Sports Fashion.

Royston Wild: Hochschild Mining

Fears of a second stock market crash seem to be growing by the day. I wouldn’t be surprised to see an explosion in the number of investors switching out of riskier assets like equities and into traditional safe-haven assets like precious metals before long. And this would benefit the share prices of certain mining companies like Hochschild Mining (LSE: HOC).

Silver values touched four-month peaks above $18.25 per ounce at the start of last month but soared again in the latter half of June as Covid-19-related fears reignited. Despite recent gains, though, the metal could still be considered undervalued compared with gold (which hit eight-year peaks in the past few sessions). And this could pave the way for extra silver price gains.

So why not get in on the action by buying Hochschild Mining? Its forward P/E ratio of around 35 times might be high, but this is a reflection of the mining giant’s great investment potential.

Royston Wild does not own shares in Hochschild Mining

Paul Summers: BAE Systems

With some companies now boasting rather generous valuations, I’m inclined to go for stocks offering a margin of safety. As such, my top British stock for July has to be defence giant BAE Systems (LSE: BA). 

The rather muted reaction to last week’s trading update felt harsh. Sure, news of a 15% decline in profits over the first half of 2020 isn’t ideal but it’s also hardly surprising. Moreover, performance is expected to be “much stronger” in H2.

BAE won’t shoot the lights out. If your objective is to build a defensive, FTSE 100-focused portfolio, however, I think the shares demand attention. Coronavirus concerns aside, the valuation of just 11 times earnings looks cheap, especially if a final dividend is confirmed this month.

Paul Summers has no position in BAE Systems.

Peter Stephens: GlaxoSmithKline

GlaxoSmithKline (LSE: GSK) could become a more popular stock among investors due to its defensive characteristics. It is less dependent on the economy’s performance to generate profit growth, which may make it relatively appealing while many FTSE 100 index peers are struggling with tough operating conditions.

GSK’s recent quarterly update highlighted encouraging progress from its vaccines and pharmaceuticals segments, while its consumer healthcare division posted strong growth due to high demand.

With an improving pipeline, a strategy to become more efficient through a split into two businesses, and a dividend yield of almost 5%, it could offer a potent mix of value, growth and income potential over the long run.

Peter Stephens owns shares in GSK.

Edward Sheldon: Prudential

My top British stock for July is financial services company Prudential (LSE: PRU).

The reason I like Prudential is that it is now predominantly focused on the savings and insurance needs of those in Asia. Given that wealth across Asia is expected to rise substantially over the next decade, I see significant potential for growth here.

I also like the fact that Prudential shares are cheap right now (a forward-looking P/E ratio of less than 10 at the time of writing), and offer a healthy dividend yield of around 3%.

All in all, I think Prudential shares look very attractive at present.

Edward Sheldon owns shares in Prudential.

Matthew Dumigan: BAE Systems

British defence and aerospace titan BAE Systems (LSE: BA) is Europe’s largest defence contractor, with market-leading positions in numerous countries around the world. Although profits for the first half of the year will take a hit, BAE expects business performance to be much stronger in the second.

Thanks to various long-term government contracts, the company’s order book remains healthy. In fact, it was recently supplemented by the announcement of a £350m deal with the UK’s Ministry of Defence.

What’s more, developments stemming from the company’s cyber and intelligence business look promising. I reckon this segment of the business could prove to be a catalyst for further growth.

Matthew Dumigan does not own shares in BAE Systems.

Rachael FitzGerald-Finch: Taylor Wimpey

For me, a good investment is a dependable business underpriced by the market. One such company right now is Taylor Wimpey (LSE: TW).

The profitable residential housebuilder has a history of positive earnings and boasts a solid balance sheet. Even better, it is still paying dividends yielding 2.6%: a must for increasing total returns.

Additionally, an 18.6% earnings yield is highly impressive, highlighting the current value of the stock price.

Things are looking good for the future, too. Land prices have dropped and competition has thinned, leaving Taylor Wimpey in a promising position for the future. That’s why it’s my top British stock for July!

Rachael FitzGerald-Finch has no position in Taylor Wimpey.

Kevin Godbold: PZ Cussons

The FTSE 250’s fast-moving-consumer-goods (FMCG) stalwart PZ Cussons (LSE: PZC) struggled with earnings for a number of years, and the share price declined. But not any more. There’s a consolidation on the price chart that could mark a trend reversal. And the move is backed by solid, underlying fundamentals in the business. New chief executive Jonathon Myers took the reins of the company in May, and he’s a an experienced FMCG executive (he spent a great deal of his career with Procter & Gamble).

I’m a big fan of change at the top in companies because it could usher in changing fortunes. July could be interesting for the stock.

Kevin Godbold owns shares in PZ Cussons.

Rupert Hargreaves: Liontrust Asset Management

Liontrust Asset Management (LSE: LIO) is rapidly becoming one of the UK’s top asset managers. Over the 12 months to the end of March, assets under management jumped 27% to £16.1bn. Following this growth, City analysts expect the firm to report a 66% jump in earnings per share for the year.

The company’s offering clearly resonates with investors. Earnings have grown at a compound annual rate of 40% over the past six years. This has helped the business increase its dividend ten-fold since 2014.

As Liontrust’s growth continues, it could be worth buying a share of this innovative fund manager for the long haul.

Rupert Hargreaves owns no share mentioned.

Tom Rodgers: Kingfisher

Among its international brands, FTSE 250 star Kingfisher (LSE: KGF) owns the key hardware and home improvement chains Screwfix and B&Q.

B&Q was named one of the UK’s ‘essential retailers’, closing on 25 March but reopening all 288 stores on 30 April — still amid lockdown. That has given it huge earnings power at a time when rivals have been burning cash and making no money. At the same time, fewer people are moving and Covid-induced stir-crazy homeowners are expected to spend £61bn this year on home improvements.

It’s cheap, too, at a P/E of 10. I think Kingfisher will clean up. 

Tom Rodgers has no position in Kingfisher.

Andy Ross: Redrow

Shares in the housebuilder Redrow (LSE: RDW) should have a good month. Housebuilding closed during the worst of the pandemic but was an industry that was allowed to reopen early on. I think it has a head start therefore on getting back to normal – assuming there’s no second spike in the virus.

With a Return on Capital Employed (ROCE) consistently above 20%, I think Redrow is an impressive company. Another potential from a boost this month comes from the promotion of Matthew Pratt to CEO.

Overall, housebuilders look to cheap to ignore this summer and I think Redrow is a solid investment.  

Andy Ross does not own shares in Redrow.

Tezcan Gecgil: Rightmove

My top British stock for July is the UK’s largest property portal Rightmove (LSE: RMV).

In May, real estate agents and new homes developers reopened in England. On 23 June, the group issued a trading update for the period covering 1 January to 31 May. Despite the current economic uncertainty, management sounded optimistic and said “home hunter demand following the reopening of the housing market has been strong. We have seen all ten of our busiest days ever on the platform since 13 May”.

Following the update, Credit Suisse raised its price target to 560p. Year-to-date, RMV shares are down about 15%, hovering at 540p. Investor nervousness around a second wave of coronavirus could spark another sell-off in many FTSE shares, including RMV stock. However, I remain optimistic regarding the strength of the housing market. I’d buy the dips.

Tezcan Gecgil does not own shares in Rightmove.

Anna Sokolidou: Tesco

The Covid-19 crisis makes consumer defensives look particularly attractive to me. Groceries and other essentials are bought regardless of the economic conditions. So, supermarkets are here to benefit even though we are currently facing a deep recession.

Tesco (LSE: TSCO) is the leader in this market segment. The supermarket chain has been growing its revenue and profits for several years already. Its shares yield a dividend of about 4%.

Moreover, Tesco adapted to the new reality of online shopping. So, it is able to compete with online grocery retailers. Its liquidity position improved as well, due to the sale of Thai and Malaysian operations.

Anna Sokolidou has no position in Tesco.

Roland Head: Smurfit Kappa

If you’re looking for a business that’s stayed in strong demand despite the coronavirus pandemic, I think FTSE 100 packaging firm Smurfit Kappa Group (LSE: SKG) could be the perfect choice.

The company’s market sectors include food retail, pharmaceuticals, medical supplies and e-commerce packaging. I can’t see demand falling in any of these areas.

Smurfit Kappa shares have performed relatively well so far this year, only falling by 10%. However, I think this stock looks very affordable at the moment, on around 12 times forecast earnings. With an update due later in July, I reckon now could be a good time to buy.

Roland Head has no position in any share mentioned.

Manika Premsingh: Smith & Nephew

The FTSE 100 medical devices’ manufacturer Smith & Nephew (LSE: SN) has been hit with bad luck since late last year. First its CEO, Kamal Nawana, resigned unexpectedly in October, 2019. By the time stock price re-stabilised after this shock, Covid-19 struck. This impacted SN’s performance.

However, as lockdowns ease, its fortunes could turn. Elective surgeries can restart now, which will increase demand for its products. SN can thrive even in a recession because of high priority spending on healthcare and pent-up demand from the lockdown months. Its share price still doesn’t reflect its potential, however. I reckon it will start picking up soon enough, making it my top British stock for July.

Manika Premsingh has no position in Smith & Nephew. 

The post Top British stocks for July 2020 appeared first on The Motley Fool UK.

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The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK owns shares of PZ Cussons. The Motley Fool UK has recommended Prudential, Redrow, Rightmove, and Tesco. 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 2020