UK Markets close in 4 hrs 10 mins

Top shares for August 2019

The Motley Fool Staff
A young man throwing and catching his daughter above his head

Rupert Hargreaves: Anglo American

Anglo American’s (LSE: AAL) performance over the past three years has been outstanding. In 2015, the company suffered one of its worst years on record, reporting a loss of nearly $6bn. However, earnings have quickly recovered. Last year the firm’s net profit hit $3.6bn. 

City analysts don’t expect this trend to end any time soon. They’ve pencilled in a net profit of $3.9bn for 2019, which puts the stock on a forward price-to-earnings (P/E) ratio of just 9.4.

As well as this discount multiple, shares in Anglo support a dividend yield of 4.4%. 

So, even though shares in this mining group are up 44% over the past year, I think they could have much further to go. 

Rupert Hargreaves owns no share mentioned.

Karl Loomes: BAE Systems

A stable blue chip and a decent dividend stock, BAE (LSE: BA) is starting to see concerns about its exposure to Saudi Arabia fade. This has been weighing on the stock for the past year, but with recent new contracts making headlines, the tables are starting to turn.

Last month it announced a combat vehicle joint venture with German partner Rheinmetall, and said it was hopeful of a multi-million-pound deal to produce advanced warships for New Zealand. Meanwhile, the European future fighter jet Tempest project, for which BAE is a key player, gained a boost after news that Sweden may be joining forces with the UK in its development. With Boris Johnson now in Downing Street, having previously pledged to increase defence spending, I think BAE shares are set to take off.

Karl owns shares of BAE Systems

Edward Sheldon: ASOS

My top stock for August is online clothes retailer ASOS (LSE: ASC).

ASOS shares took a hit in July after the group issued a profit warning. Blaming operational issues associated with its warehouse transformation programme, the group reduced its profit forecast for FY2019.

I expect ASOS to recover from this setback as its problems appear short term in nature. The retailer is still growing at a healthy rate and with significant market share left to capture in the US and across Europe, the long-term growth story remains attractive. With the stock down 60% over the last year, I think it’s a good time to be buying.

Edward Sheldon owns shares in ASOS.

Kevin Godbold: AstraZeneca

On 25 July, pharmaceutical giant AstraZeneca (LSE: AZN) delivered encouraging first-half results revealing to us an “acceleration” in second-quarter product sales. All three of the firm’s therapy areas produced an “encouraging” performance in Q2.

Chief executive Pascal Soriot said in the report he expects five of the firm’s new medicines to be “blockbusters” this year. I reckon this is an upgrade from previous market expectations and, indeed, the share price appears to have broken out to new highs. I think the outlook for shareholders for August and beyond looks attractive, and AstraZeneca could be on the road to an extended period of growth.

Kevin Godbold does not own shares in AstraZeneca.

Roland Head: Jupiter Fund Management

Active fund managers such as Jupiter Fund Management (LSE: JUP) have suffered as investors have switched to cheaper passive funds.

This remains a concern, but I think that specialist fund managers with a genuinely differentiated active approach will remain in demand.

FTSE 250 firm Jupiter is a mid-sized player with $44bn of assets under management. Profitability is high. The group has generated a return on equity of more than 20% in recent years, with an operating margin close to 40%.

JUP shares trade on about 14 times forecast earnings and promise a yield of 6.4%. I think this could be a good time to buy.

Roland Head does not own shares in Jupiter Fund Management.

Paul Summers: GlaxoSmithKline

With a no-deal Brexit now looking likely, I’d be inclined to seek safety in large-cap stocks that derive the majority of their earnings overseas and boast defensive qualities that help them navigate periods of economic uncertainty without issue. Since the demand for healthcare won’t change regardless of how we depart the EU, my pick is pharma giant GlaxoSmithKline (LSE: GSK).

Unfortunately for prospective owners, a rise of 14% since the beginning of the year means that Glaxo’s shares aren’t as attractively priced as they once were. Nevertheless, a forecast P/E of 15 still looks reasonable for the stability they offer. The 4.7% dividend yield (at the time of writing) will also help to soothe frayed nerves until we have a better understanding of how the land lies.

Paul Summers has no position in GlaxoSmithKline.

Andy Ross: Redrow

FTSE 250 housebuilder Redrow (LSE: RDW) looks to me to be fundamentally undervalued in a sector that has been out of favour for a while but should bounce back. The housebuilder combines a low P/E of six with a dividend yield of 5.1%. The dividend is covered more than three times by earnings so appears sustainable which is good for the future. 

The price-to-earnings growth ratio is around 0.3, indicating the company is very cheap right now. With the shares trading so cheaply and the share price well down from its highest 2019 level, I think this month would be an ideal time to pick up shares in the company. 

Andy Ross does not hold shares in Redrow.

Manika Premsingh: Pearson

Pearson (LSE: PSON) might not be the most talked about FTSE 100 share, but it has seen promising developments recently, making it my top pick for August 2019. It turned out a good set of results for the first half of the year, and has even upgraded its earnings per share guidance.

The education material and services provider is a classic case of an established company being disrupted by the new digital way of life. The required transformation is beginning to pay off, though. In its latest update, CEO John Fallon underlines the gains from “accelerating our shift to digital” and is also optimistic about the future. Its share price has responded positively to the update and I believe there’s more room for further increase.   

Manika Premsingh has no position in Pearson.

Kirsteen Mackay: JD Sports 

During the past year, the JD Sports (LSE:JD) share price has made gains of almost 50%. From a low of 318.5p, it currently sits at 639p.

I think JD Sports will continue to climb in August as investors look forward to positive interim results on 10 September.

JD Sports has confirmed it has continued to achieve “encouraging” like-for-like sales growth in its core sports fashion both in the UK and other global markets. It may also benefit from Sports Direct‘s poor performance, with retail investors jumping ship.

Kirsteen does not own shares in JD Sports or Sports Direct.

G A Chester: National Express

National Express (LSE: NEX) has the dominant — indeed, only — nationwide network of coach services in the UK. This is attractive in itself, but the group is also expanding rapidly in targeted high-growth markets overseas (79% of revenue in the first half of this year).

Half-year results last week showed continuing momentum across the business, with “revenue, profit and margin growth in every division,” and the company “currently trading ahead of expectations.”

With excellent opportunities for further growth, an undemanding P/E of 12 and a dividend yield pushing 4%, I’m making National Express my top ‘buy’ for August.

G A Chester has no position in National Express.

Royston Wild: Shanta Gold

A brilliant blend of macroeconomic and geopolitical strife could lead to more meaty gold price gains in the month of August.

Jefferies is just one City forecaster  that’s been upgrading its bullion forecasts of late and it now expects prices to average $1,425 and $1,450 per ounce in quarters three and four respectively, up from current prices of around $1,420.

One great way to play this theme is by buying into Shanta Gold (LSE: SHG), I believe, in part because of its cheap paper valuation (a P/E ratio of 8.6 times) which leaves plenty of scope for more share price strength. It’s already got the wind in its sails on the back of some terrific production numbers over the past few weeks.

Royston Wild does not own shares in Shanta Gold.

Ambrose O’Callaghan: Hochschild Mining

My top stock for August is Hochschild Mining (LSE: HOC). Hochschild stock has surged to 52-week highs in July from a near 52-week low in late May. It produced 245,000 gold equivalent ounces for the half-year, which was the second-best production performance in its history.

I’m even more excited about the bullish signals for the spot price of gold, which could act as a nice tailwind for Hochschild. The yellow metal has built momentum on the back of rising trade tensions and, more crucially, a dovish turn from central banks across the developed world. Hochschild has reported year-over-year improvement at each of its gold-producing mines. These are all great signs for the stock for the remainder of the year.

Ambrose O’Callaghan has no position in Hochschild Mining.

More reading

The Motley Fool UK owns shares of and has recommended ASOS and GlaxoSmithKline. The Motley Fool UK has recommended AstraZeneca, Pearson, and Redrow. 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 2019