Every month, we ask our freelance writer investors to share their top stock ideas with you — here’s what they said for June!
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Begbies Traynor Group
What it does: Begbies Traynor provides financial services for companies in distress. The firm is a specialist in corporate insolvency.
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By Royston Wild. The outlook for the UK economy is getting gloomier as inflation accelerates. National output shrank in March, latest data shows, and recessionary risks are rising. It means that counter-cyclical share Begbies Traynor Group (LSE: BEG) could be a top stock for me to buy this June.
A mix of economic deterioration and the withdrawal of government furlough support is driving corporate insolvencies through the roof. The cash crunch facing British business looks set to intensify, too, as lending conditions get tougher.
A study from the Federation of Small Businesses shows that banks are “pulling up the drawbridge” to firms seeking capital. Indeed, just 19% of companies surveyed described the availability of credit as “good” in quarter one. This was the lowest figure since 2016.
In this climate I think demand for Begbies Traynor’s financial services could soar. City analysts think the stock’s earnings will rise 10% in the 12 months to April 2023. I believe this estimate could be revised upwards as the fiscal year progresses.
Royston Wild does not own shares in Begbies Traynor Group.
XP Power
What it does: XP Power is a designer and manufacturer of power converters for the global electronics industry.
By Zaven Boyrazian. With Covid-19 creating plenty of disruptions for manufacturing businesses like XP Power (LSE:XPP), it’s not surprising to see the stock suffer by nearly 40% over the last 12 months. However, these issues are ultimately short term. Meanwhile, demand for the group’s products continues to climb, especially from semiconductor manufacturing companies.
Looking at the latest quarterly results, revenue grew by a meagre 8%, courtesy of the aforementioned disruptions. But the order book stands at a record £260m. And with a new manufacturing facility now under construction, the firm’s order capacity is set to expand considerably over the next few years.
In my opinion, this places XP Power in a favourable position to secure long-term growth. And that’s why, alongside the accolade of being my preferred stock for June, the recent tumble in share price looks like a great buying opportunity for my portfolio today.
Zaven Boyrazian does not own shares in XP Power.
Aviva
What it does: Aviva is a UK company offering a range of insurance and wealth management services
By Alan Oscroft: Aviva (LSE:AV) has been restructuring itself for several years, disposing of non-core businesses and cutting costs. As a result of that, it has had the cash to return a total of £4.75bn to shareholders, directly and via share buyback. The company now plans to pay progressive dividends yielding better than 7% this year and next.
Aviva is not out of the woods yet, after recording an earnings fall in 2021. The financial sector is also facing an uncertain outlook in today’s economic climate. But Q1 figures in May showed solid progress.
On balance, I think Aviva has all but turned the corner. But I don’t think the share price has caught up yet. Now Aviva has all but completed its capital return, investors can focus on future of the restructured company.
I’m hoping June could be the start of a renewed bull run. I’m holding, and might even buy more.
Alan Oscroft owns shares in Aviva.
Tritax Big Box REIT
What it does: Tritax Big Box REIT is a real estate investment trust that owns a portfolio of logistics warehouses.
By Edward Sheldon, CFA. Tritax Big Box REIT (LSE: BBOX) shares pulled back in late April (after e-commerce giant Amazon announced that it has a surplus of warehouse space) and I believe this has created a buying opportunity.
One reason I’m bullish here is that in the company’s recent first-quarter results, management advised that demand for new logistics space remains “very strong” and that the group is well-placed to capitalise on the high level of demand through its development pipeline. It added that it is handling inflation through active management of open market rent reviews, along with inflation-linked leases.
Another reason is that since the share price has fallen, eight company insiders, including the Chairman, have stepped up to buy stock. This indicates that those within the company expect the share price to rebound.
Now, BBOX does have a relatively high valuation. This adds some risk. If future results are disappointing, the stock could underperform.
Overall, however, I believe the long-term risk/reward proposition here is attractive enough to name the stock as my favourite for June.
Edward Sheldon owns shares in Tritax Big Box REIT and Amazon
Games Workshop
What it does: Games Workshop designs and manufactures miniatures and games. It sells these through various retail channels.
By Stephen Wright. Games Workshop (LSE: GAW) is a stock that I’d very much like to own in my portfolio. The company has a loyal and committed customer base, with good intellectual property rights protecting its business. It also has a balance sheet that instils confidence in me, having more cash than debt.
The company is in an interesting place at the moment. I think that high inflation and rising interest rates are likely to put pressure on businesses in this sector. But Games Workshop’s unique product should, in my view, see them through.
At the stock level, I’ll be looking to exploit any weakness in June to start building out a position. I think it’s important to be disciplined about overpaying, but I think there could be an opportunity here to acquire a great business at a reasonable price.
Stephen Wright does not own shares in Games Workshop
Abrdn
What it does: Abrdn is a global investment management company, managing a wide range of assets for its clients.
By Michelle Freeman. It may seem counter-intuitive to pick Abrdn (LSE:ABDN) as my top stock for June. After all, its core business model is its fee-based investment offerings, opposite to the Motley Fool line of thinking.
But you see, it’s not difficult to make money in a long bull market. However, a good strategy is priceless when it comes to navigating choppier investment waters. That’s why I think the recent run of doom and gloom news on investment markets will see a lot of retail investors willing to pay a little more for investment advice.
With the share price remaining down over 25% year-to-date, I see plenty of long-term upside potential. That’s backed up by a majority of analysts holding buy targets above today’s price.
And when you throw in that very tasty +7% dividend yield, it makes it a whole lot easier to stay the course through the ongoing market volatility.
Michelle Freeman does not own shares in Abrdn.
Associated British Foods
What it does: ABF is the owner of retailer Primark and four food production businesses in grocery, sugar, ingredients and agriculture
By G A Chester. Associated British Foods (LSE: ABF) is out of favour with the market. Indeed, you have to go back almost a decade to find the share price as low as its current level.
Primark suffered during the pandemic, but the group remained profitable thanks to its food businesses enjoying strong demand. Primark has since recovered well, and food sales have continued to grow.
However, like a lot of companies, ABF is now seeing significant inflationary pressures in raw materials, supply chains and energy. These costs will negatively impact the group’s profit margins. Notwithstanding the headwinds, management’s outlook for the year is for “significant progress in adjusted operating profit and adjusted earnings per share.”
There’s a risk management’s expectations could prove over-optimistic, because the economic backdrop is so uncertain. Nevertheless, with the share price and valuation at multi-year lows, I think I’m looking at a rare opportunity to buy into a high-quality enterprise.
G A Chester does not own shares in Associated British Foods
Games Workshop
What it does: Games Workshop designs, manufactures, and sells fantasy miniatures and related products
By Paul Summers. Rather than move into cheaper but inferior value stocks at a time when investor interest in them might be peaking, I think the current market volatility offers me a wonderful opportunity to buy some of the UK’s best growth stocks at knock-down prices. One example is Games Workshop (LSE: GAW).
As I type, shares are down over 30% year-to-date and almost 45% off their 52-week high. This brings the price-to-earnings ratio down to 18 – mightily attractive considering the high margins and massive returns on capital Games usually posts.
Sure, spending on hobbies will likely be reduced as the cost of living gallops higher. However, I reckon the sheer popularity of its products and loyalty of its customers means business should recover strongly once the clouds have passed.
So long as I’m prepared for hold for more than a few months, building a position in this stock in June could prove lucrative.
Paul Summers does not own shares in Games Workshop
Associated British Foods
What it does: Associated British Foods is a highly diversified business. It is the owner of a number of leading brands including: Primark, Silver Spoon and Kingsmill. It also produces a number of food ingredients including sugar beet and flour.
By Andrew Mackie. Associated British Foods (LSE:ABF)’s share price is now trading at levels not seen since the stock market crash of March 2020. Here’s why it’s my top stock for June.
However, to my mind, the business is in a lot stronger position than during Covid. Yes, Primark has been forced to raise prices on a number of autumn items due to rising input costs. But all its stores are trading and revenue growth remains strong. Its no-frills brand will likely resonate well amongst increasingly cost-conscious consumers, particularly in the run up to the holiday season.
But ABF is a lot more than just Primark. The business continues to invest heavily in its grocery brands. Twinings, for example, recently enhanced its offering in the lucrative wellbeing teas market.
I am also excited about its agriculture division which produces animal feeds for pig, poultry and dairy. As food security becomes an increasingly important consideration, yield sustainability and environmentally-friendly practices will favour innovative businesses such as ABF.
Andrew Mackie owns shares in Associated British Foods.
JD Sports Fashion
What it does: JD Sports Fashion is a retail chain specialising in sports, fashion and outdoors brands, with a large digital commerce footprint.
By Christopher Ruane. The retailer JD Sports Fashion (LSE: JD) is known for low prices — but lately that has been true for the company’s shares as well as its shoes.
Over the past 12 months the JD Sports share price has tumbled 35%. But I think that fall is overdone and see a buying opportunity for my portfolio. The company expects to report its annual results in June. I reckon that could lead investors to reconsider the share price.
JD has said that headline profits before tax and exceptional items for last year are expected to come in at £940m. It thinks that 2023 will be at least as good, although a worldwide shortage of certain types of footwear is one risk to revenues and profits. With a market capitalisation of £6.2bn, I think the company looks cheap given its strong performance and attractive business outlook, making it my top stock for June.
Christopher Ruane owns shares in JD Sports.
Anglo American
What it does: Anglo American is a mining firm operating across the globe. It mines diamonds and platinum group metals (PGMs), together with copper, iron ore, and nickel.
By Andrew Woods. Anglo American (LSE:AAL) posted bumper pre-tax profits in 2021 of $17.6bn, up from $5.4bn the previous year. The company has recently been benefiting from historically high metal prices. These higher prices have been largely caused by the reopening of economies after the pandemic. Furthermore, the situation in Ukraine has heightened supply concerns and the overall trend of rising metal prices could be here to stay for a while yet.
The firm also recently signed a memorandum of understanding with EDF Renewables. This will develop solutions to make Anglo American’s South Africa operations run on 100% renewable energy. This is part of an effort by the business to make its mining operations more environmentally friendly.
While iron ore production declined for the first three months of 2022, the diversity of Anglo American’s business may continue to allow it to reap the benefits of surging demand for base metals, not to mention rising revenue from growing diamond sales in the US.
Andrew Woods does not own shares in Anglo American
Computacenter
What it does: Computacenter supplies IT hardware and services to large corporate and public sector organisations.
By Roland Head. FTSE 250 group Computacenter (LSE: CCC) has a long history of steady growth. Sales have doubled to £6.7bn since 2012, while Computacenter’s annual profit has tripled to £185m over the same period.
Demand surged through the pandemic due to work-from-home and ecommerce demand. Although growth has eased in 2022, Computacenter management still expect to report “a year of further progress”. This tells me that another increase in annual profits is expected.
The main risk I can see is that an economic slowdown in 2022/23 could hit demand and cause Computacenter to miss a year or two of growth. However, I think the company’s share price already reflects a cautious view.
Computacenter is highly profitable and ended last year with net cash of £95m. The stock’s forecast price/earnings ratio of 15 times is at the lower end of its historical range. I think the shares look decent value at this level.
Roland Head does not own shares in Computacenter.
Burberry
What it does: Burberry is a British luxury fashion brand that design and distributes ready-to-wear items. These include trench coats, leather goods, footwear, fashion accessories, eyewear, fragrances, and cosmetics.
By John Choong. Having seen a 15% decline this year, the Burberry (LSE:BRBY) share price could be on the verge of a rebound this summer. As a luxury brand, many of Burberry’s goods hedge against inflation. This was evident in its latest earnings results, as its profitability hit an eight-year high. The company makes the bulk of its revenue from China, and it’s been capitalising on the uptake in luxury consumer spending within the region. In fact, the British firm opened a flagship store in Shanghai recently.
Although I expect the next trading update to post bitter numbers as a result of the recent lockdown in Shanghai, I remain optimistic for the FTSE 100 firm’s long-term prospects. I believe that sales figures will rebound along with its share price once restrictions come to an end, and that a sour trading update for Q1 could present a buying opportunity for the stock in June.
John Choong does not own shares in Burberry.
