Last Christmas, I gave you – no, not my heart, but a review of two UK stocks I thought might make you richer in 2020.
Rather than blowing money on presents people don’t want or need, I said that these two growth stocks could be the best use for your Christmas money. I’m putting my reputation on the line here, by checking up on my own predictions. So should you be thankful for my Christmas gift?
IG Design Group
Greetings card and gift wrapping company IG Design Group (LSE: IGR) caught my eye after growing an incredible 850% over five years, while defying the retail slowdown afflicting the UK high street.
It helped that this is a global company, whose products now retail in more than 200,000 stores across 80 countries. Around 60% of its revenues come from the US and just over 20% from the UK, with the remainder split between Europe and Australia.
Since I tipped the AIM-listed stock in December last year, its share price has climbed another 23%, I was happy to discover.
Its latest results show a company that is still growing nicely, with reported revenue up 21% to £248.4m in the six months to 30 September, driven by organic growth and the £56.5m acquisition of Minnesota-based Impact Innovations. Better still, net debt fell 14% to around £86m, while the interim dividend per share increased 20% to 3p.
The IG Design Group share price’s rapid growth means the stock is relatively expensive, trading at 20.8 times forward earnings. However, it isn’t that expensive, given that City analysts are forecasting earnings growth of 98% in the year to 31 March 2020, followed by 8% the year after.
The company has also built strong, long-term relationships with retailers, which should help if we have bumpy times ahead. I would be happy to keep this in my portfolio in 2020 and beyond.
International Consolidated Airlines Group
My other Christmas stock tip was International Consolidated Airlines Group (LSE: IAG), owner of British Airways, Iberia, Aer Lingus and budget airlines Level and Vueling. I recommended it despite a bumpy 2018, when the share price was hit by Brexit, crew and air traffic control disputes, and a UK competition authority investigation into its revenue-sharing agreement with Finnair and American Airlines.
I was drawn by its incredibly low valuation of just 5.9 times forward earnings and 3.9% forecast yield, covered 4.3 times by earnings.
One year later, the €12.88bn FTSE 100 stock is down 7%, so no glory for me here. Continued strike threats knocked investor sentiment, while the group was also hit with a £183m fine following the hacking of its website.
However, it has recovered smartly from a summer slump, and is up 27% in the last three months, helped by the collapse of rival Thomas Cook.
The IAG share price is still incredibly cheap, trading at five times forward earnings, while yielding 4.5%, with healthy cover of 3.75 times earnings.
The airline industry is tough, especially for established players, due to relentless price pressure, while factors such as terror attacks and fuel costs are beyond management control. This remains a hugely profitable company and it is certainly on the right track at the moment. I would still buy it.