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Top British stocks for October 2020

The Motley Fool Staff
·9-min read
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Graph Falling Down in Front Of United Kingdom Flag

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

Harshil Patel: Fresnillo

Gold and silver prices have rocketed this year and could be set to march higher. Covid-19 related lockdowns, weakened confidence, and macro-economic uncertainty sent investors to safe-havens like gold and silver.

Rather than buying gold and silver, I’d buy shares in FTSE 100 miner Fresnillo (LSE:FRES) instead. As the world’s largest producer of silver and Mexico’s largest gold producer, Fresnillo holds a dominant position in this space.

With high-quality assets and a healthy balance sheet, I’d say this highly rated miner is well placed to benefit from further rises in gold and silver prices.

Harshil Patel does not own shares in Fresnillo.

Rachael FitzGerald-Finch: Anpario

Bad times make good opportunities for investors to keep supporting strong businesses. One such business in my view is Anpario (LSE:ANP), an animal feeds additives producer.

Over the last 10 years, the share price has steadily grown over 350%, reflecting the firm’s strong underlying fundamentals. Notably, it hasn’t been too affected by the coronavirus pandemic either.

Currently trading on a P/E of 22, it maybe more expensive than similar firms but in my view, this reflects the quality of the stock.

Currently boasting a market-to-book ratio of 2.6, and a 2% dividend yield, I believe this is a top stock for October.

Rachael FitzGerald-Finch has no shares in Anpario.

Manika Premsingh: Anglo American

FTSE 100 mining giant Anglo American (LSE: AAL) is due for a trading update in October. This is the first such in the post-lockdown period. So far, positive news looks likely. AAL’s diamond sales have improved. It also expected its platinum group metals, copper and iron ore segments to be better placed as global economic recovery ensued, in its last financial update. Deutsche Bank has recently lifted its share price target on the stock too. However, economic outcomes are still uncertain, especially since the pandemic is still somewhat out of control. I think it’s a good idea to keep an eye out for AAL’s next update and take an investing call on it accordingly.

Manika Premsingh has no position in Anglo American.

Andy Ross: Tesco

Shares in the grocer Tesco (LSE: TSCO) could do well in a volatile market which we might well see in October. The end of September has seen markets gyrate in response to the latest fears over Covid-19, this could well be a theme during this month as well.

When the market was struggling back in March defensive businesses like Tesco were among the better performers. The shares still seem cheap, pay a dividend and demand for food won’t go away. There’s also a new CEO.

I expect this top stock to keep doing well in October for these reasons.

Andy Ross does not own shares in Tesco.

Anna Sokolidou: Unilever

Unilever (LSE:ULVR) shares have almost recovered from the spring market crash. The company sells necessities – food and personal care items.

Although Unilever is one of the industry’s leaders, it’s not completely immune to macroeconomic challenges. But the good thing is that Unilever operates in many countries. So, its risks are moderate because they are spread between different regions.

The company’s investment grade credit rating is a big plus. too. Unilever stock is trading at a price-to-earnings ratio of just above 20.

Anna Sokolidou does not own Unilever shares.

Rupert Hargreaves: Pets At Home

Pets At Home (LSE: PETS) has seen the demand for its services surge this year. In its latest trading update, the company reported double-digit like-for-like sales growth in the eight weeks to 10 September.

It looks as if this trend is here to stay. Demand for pets has jumped in 2020. As the largest pet-focused retailer in the country, Pets will be the first port of call for many consumers who’re looking for products for their furry friends.

Indeed, Pets is so optimistic about the future, it’s looking to invest £48m in a new giant distribution centre. Therefore, now may be a good time to buy a share of this growing business at an attractive price.

Rupert Hargreaves does not own shares in Pets At Home.

Roland Head: Ferrexpo

Iron ore pellet producer Ferrexpo (LSE: FXPO) currently trades on just 4.5 times 2021 forecast earnings. The stock also offers a forecast dividend yield of 7.3% for next year.

As far as I can see this low valuation has nothing to do with the business itself, which has some of the lowest costs in the industry and good economies of scale.

Although there’s some risk of a slowdown in demand next year, I think Ferrexpo’s valuation is being held back by allegations relating to its Ukrainian controlling shareholder. In my view, this risk could be worth taking. I think Ferrexpo shares are worth more.

Roland Head does not own shares in Ferrexpo.

Paul Summers: Begbies Traynor

Rishi Sunak’s new Job Support Scheme might help ease the pain but I suspect a lot of UK businesses could still fold over the next few months. This is why, purely from an investment perspective, I think insolvency firm Begbies Traynor (LSE: BEG) should be a top stock for October.

A valuation of just under 15 times forecast earnings looks attractive when you consider the amount of work that may land on the small-cap’s doorstep. Positive half-year numbers in December could be the catalyst for the share price to move higher.

Begbies also continues to pay dividends. At the time of writing, a 3p per share payout in FY21 gives a yield of 3.5%.

Paul Summers has no position in Begbies Traynor.

G A Chester: Capital Gearing Trust

I named Capital Gearing Trust (LSE: CGT) my top buy for 2020. I felt its long history of steady, low-downside returns, made it a good bet for whatever the year would bring. It’s performed well so far, and remains my pick of choice as we head into the final quarter.

Market volatility is likely to continue for the foreseeable future, what with Covid-19, the US election, looming Brexit, and the uncertain outlook for the global economy. Capital Gearing’s holdings of cash, bonds and gold alongside its current 42% exposure to equities make it a good pick for an unpredictable world, in my view.

G A Chester has no position in Capital Gearing Trust.

Stuart Blair: Aviva

I think Aviva (LSE: AV) is one of the best stocks to buy in October. Last month, the new CEO, Amanda Blanc, demonstrated a willingness to make major changes to the business. This included selling a majority shareholding of its Singapore Arm for £1.6bn, in a shrewd move that should allow the insurer to focus on Britain, Ireland and Canada.

Blanc also bought over 300,000 shares at a price of just over 300p each. This proves that Blanc is optimistic for a recovery, and with the Aviva shares trading at a 34% discount year-to-date, so am I.

Stuart Blair owns shares in Aviva.

Tom Rodgers: CMC Markets

CMC Markets (LSE:CMCX) has had an incredible 2020, and there was more good news for the FTSE 250 spreadbetting and share trading platform in September, when it announced it would beat income expectations for the 2021 full year.

Existing clients are trading more, and CMC is growing fast by attracting new users, while retention has been “particularly strong” above 80%, bosses say. I see this trend continuing as traders seek to exploit volatile markets. At a P/E of just 7 and boasting a healthy 4.62% dividend, these shares are still super-cheap for the value on offer.

Tom Rodgers does not own shares in CMC Markets.

Edward Sheldon: Diageo

My top British stock for October is Diageo (LSE: DGE). It’s a leading multinational alcoholic beverages company that owns a portfolio of well-known spirits brands.

Diageo shares have fallen significantly this year. That’s understandable, as Covid-19 is presenting the company with a number of challenges. I think this share price weakness has created a real opportunity for long-term investors, however. I remain convinced that, eventually, the stock will bounce back.

It’s worth pointing out that in September, Diageo’s CFO spent around $250,000 on company stock. This is a good sign – it suggests that the insider sees the stock as undervalued right now. This insider purchase reinforces my view that it’s a great time to be building a position in Diageo.

Edward Sheldon owns shares in Diageo.

Royston Wild: Unilever

October could prove to be another tough month for investor confidence. With waves of new Covid-19 infections hitting all parts of the globe, the US Presidential election heating up, and the Brexit process entering a crucial stage now could be a good time to buy some good old-fashioned safe-haven stocks.

On the top of my list would be Unilever. This FTSE 100 share has exceptional defensive qualities thanks to its broad geographical footprint, its wide range of products, and the exceptional brand power of these goods. This is why its share price has recovered strongly in recent months and is up 10% since the start of 2020 despite the troubling economic outlook.

One final thing: Unilever is set to release third-quarter financials on October 22. The consumer goods colossus smashed broker forecasts with its half-year release in July. Another stunning release later this month could give the share price a further dose of rocket fuel.

Royston Wild owns shares in Unilever.

Kirsteen Mackay: AstraZeneca

Pharmaceuticals giant AstraZeneca (LSE:AZN) is a strong company with a portfolio of credible medicines. Its high price-to-earnings ratio may put you off its share price as it looks expensive, but I think long term this is a good company that will stick around.

It offers a 2.4% dividend yield and earnings per share are 79p. With rumours of another lockdown ramping up and Covid-19 panic rising, I think AstraZeneca stock will continue to climb in October as it continues to forge ahead in the development of a vaccine with Oxford University.

Kirsteen does not own shares in AstraZeneca.

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

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The Motley Fool UK has recommended Diageo, Fresnillo, Tesco, and Unilever. 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