(Part 2/2 of “Top shares for July“)
Stepan Lavrouk: Carnival
Shares of FTSE 100 company Carnival (LSE: CCL) have taken a beating recently due to downwards revision to earnings issued by management on the latest investor call. Whilst the results were definitely not pretty, I believe it can still be a great income performer.
Carnival is still the largest cruise ship operator in the world and has the largest market share of any company in the industry, as well as a healthy balance sheet. Carnival currently trades at a price-to-earnings ratio of 10.1 (below its historical ratio of 17.8) and a dividend yield of 4.5%. As such, I think it represents good value at the current price.
Stepan Lavrouk does not own shares in Carnival.
Paul Summers: IG Group
I still think spread-betting and CFD provider IG Group (LSE: IGG) is worth backing, so much so that it’s now one of the biggest holdings in my portfolio.
The FTSE 250 member has been impacted by increased regulation and reduced client activity over the last couple of years but May’s trading update suggested that the latter had finally started to recover and full-year numbers (due 23 July) may actually be better than previously expected.
Right now, the stock is available for just over 13 times earnings — less than its five-year average of 16. There’s a 7.5% dividend yield on offer too.
Paul Summers owns shares in IG Group
Andy Ross: Avast
The high rate of growth at FTSE 250 cybersecurity company Avast (LSE: AVST) to me makes it look great value. The share price is up 10% this year and by 45% over the last 12 months.
First-quarter results, which covered the period to the end of March 2019, showed revenue up 8.5%. This is line with previous quarterly growth showing sustained momentum.
Best of all (given the growth) is the value of the shares. They are cheap as they only trade on a P/E ratio of around 13, far lower than other high-potential technology stocks.
Andy Ross has no position in Avast.
Tezcan Gecgil: GlaxoSmithKline
My top stock for July is GlaxoSmithKline (LSE: GSK). The latest earnings release showed a strong balance sheet as the group reported better-than-expected Q1 2019 revenue. Its global dominance in two segments – lower respiratory biopharmaceuticals and immune deficiency disorders – ensures a high degree of predictability in cash flow.
Going forward, analysts expect continued growth in Shingrix, GSK’s fast-growing shingles vaccine, Nucala, a respiratory drug, as well as Juluca, the HIV newcomer.
Due to its rock-solid dividend, which stands at 5%, and its robust growth potential, GlaxoSmithKline shares belong in any balanced portfolio of healthcare stocks. CFO Iain MacKay has also recently reaffirmed the pharma giant’s projected dividend for the year.
Tezcan Gecgil has GSK covered calls (July 5 expiry) on GSK ADR shares listed on NYSE.
G A Chester: Imperial Brands
Shares of tobacco companies like Imperial Brands (LSE: IMB) have been absolutely hammered in recent years. However, despite headwinds of falling global volumes in traditional products, uncertainty about how markets for next-generation products will develop, and the ever-present ‘menace’ (for the companies) of increasing regulation, I think the punishment meted out by the market to Imperial has been way overdone.
Pricing power, portfolio management, prodigious free cash flow, and ability to adapt to new circumstances, all seem to have been forgotten by investors. Putting the positives alongside an unprecedented bargain-basement P/E and high dividend yield, makes Imperial my top ‘buy’ this month.
G A Chester has no position in Imperial Brands.
Manika Premsingh: Tullow Oil
Not only is Tullow Oil’s (LSE: TLW) performance promising, the fortunes have turned in its favour too, making it my top share for the month of July.
In its latest trading update, the company says that the business has made “steady progress” during the first half of the year. Based on this early information, I anticipate a price spike when the half-year results are released on July 24, and believe that by extension that it’s better to buy the shares before that time.
The share price already showed a sharp upturn as crude prices rose due to tensions between the US and Iran in June. And even without this purely external factor, there was still steam for the share price to rise more – the shares are trading at over 12% less than the highest levels seen in 2019 so far.
Manika Premsingh has no position in Tullow Oil.
Peter Stephens: Unilever
While concerns surrounding a global trade war have caused stock market volatility to rise in recent months, the prospects for Unilever (LSE: ULVR) continue to be bright. It has a strong position in rapidly growing consumer-goods markets across the emerging world, with them due to contribute to a 9% rise in earnings in 2019.
Although the stock trades on a P/E ratio of 21.8, its long-term growth opportunity may mean that it is worthy of a premium when compared to the wider FTSE 100. That’s especially the case when its diverse business model, sound balance sheet and range of brands are factored into its risk/reward ratio.
Peter Stephens owns shares in Unilever
Kevin Godbold: Telecom Plus
I reckon value has been building in the business of integrated utility provider Telecom Plus (LSE: TEP) for a while. In July the share price could move to reflect operational progress. But the FTSE 250 firm is attractive to me longer term, too.
Its Utility Warehouse trading name and unusual partner/member business model have been driving generally rising revenue, earnings, cash flow and dividends. Meanwhile, decent full-year results delivered in June add to my optimism along with the positive outlook. The forward-looking earnings multiple in the early twenties looks full, but I see that as a mark of quality.
Kevin Godbold does not own any Telecom Plus shares.
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The Motley Fool UK owns shares of and has recommended GlaxoSmithKline and Unilever. The Motley Fool UK has recommended Carnival and Imperial Brands. 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