Well insulated

As a luxury goods company, Burberry stands to gain during a time of inflation. This is in part due to a psychological phenomenon called the Veblen effect. This is when consumers perceive an increase in price as a good thing because it brings better value.

This effect could be seen when Burberry gave its Q1 trading update. Although overall revenue stagnated, this was due to Chinese sales being dampened by lockdowns. The real spark was the numbers from Europe. Sales from the region saw significant growth despite sky-high inflation plaguing the region.

It’s for that reason that Burberry was able to provide a positive outlook. The board forecasts to hit high single-digit revenue growth, which should be further helped by a weaker pound. Additionally, management expects to achieve an operating margin of 20% by FY24.

Daniel Lee’s in the house

Last month, current COO and CFO Julie Brown mentioned her intention to step down from her role in March. Although her replacement is yet to be named, outgoing CCO Riccardo Tisci was replaced with Daniel Lee. As a result, Burberry saw its share price rally by 10%.

Despite Tisci’s excellent reputation, Lee is thought to be bringing a breath of fresh air to the brand. During his time at Bottega Veneta, Lee managed to revive the brand during a period of stagnation. This is what Burberry shareholders will be expecting when he releases his first line in February. He’s expected to use his experience at Bottega innovate the British brand’s heritage check and trench into a collection of best-selling leather accessories, which have been lagging behind the likes of LVMH, Gucci, and Dior. As a result, an overhaul and pivot towards a younger generation should boost sales and margins, according to fashion analyst Flavio Cereda of Jefferies.

Is Burberry wearing off?

With that in mind, would I add to my current Burberry position? Well, I’ve got no doubts about the British firm’s financials. It’s got a robust balance sheet and has been able to maintain its excellent profit margins of 14% through this difficult period.

That being said, I do have my reservations. Burberry still heavily relies on China to prop up its numbers. Given that more than half its sales come from Asia, hoping for a rebound there is a massive bet. The latest data from China shows how risky this bet is, as consumer spending dropped substantially in September.

Even so, I believe the high-end resilience of the luxury market paired with the long-term prospects of the company make it a great inflation hedge. Nonetheless, the current headwinds surrounding a China recovery presents a ceiling to its earnings potential. I think this is why Burberry shares have failed to breach the £20 mark.

After all, analysts from the likes of Barclays and JP Morgan have given the stock a neutral rating with a target price of £20. Therefore, I’m planning to hold my current position for the time being and may buy more if the stock drops lower.

And, of course, the notion that the government would have to borrow from international lenders made the pound weaker. There are also concerns the tax cuts will be inflationary, which, in turn, will increase the government’s debt burden as around a quarter of its debt is inflation linked. None of this is good for the pound.

However, some UK-listed stocks can benefit from a weaker pound, namely those that earn the majority of their earnings overseas. In fact, companies in the FTSE 100 derive approximately 75% of their revenues overseas.

High fashion

Before the pandemic, around 40% of Burberry‘s (LSE:BRBY) sales were from China, or Chinese tourists buying abroad. The company also generates a lot of its revenue in the US. In fact, a very small percentage of the London fashion house’s income comes in the form of British pounds. The yuan and the dollar have both gained considerably on the pound this year and this should lead to inflated GBP earnings for Burberry.

The weakness of the pound could also push costs up however, as some of Burberry’s production facilities are located in northern England. While some raw material costs might be increasing, at least labour costs should remain unaffected by exchange rate fluctuations.

High fashion also tends to be fairly bombproof when recessions come. This is because the uber wealthy tend to be insulated from economic challenges. And this is a positive characteristic for the brand with economic growth slowing around the world.

I don’t own Burberry shares but I’m looking to add the stock to my portfolio soon as it should benefit considerably from a weaker pound and I appreciate its defensive qualities.

Drinks leader

Diageo (LSE:DGE) owns 200 drinks brands, selling in more than 180 countries. In 2018, the US represents over a third of Diageo’s net sales and almost half of its operating profits. And that’s positive as the dollar really is king right now.

In fact, the company makes approximately twice as much income in North American markets, where currencies have stayed strong, than in Europe, including the UK. But like the pound, the euro has been pretty weak this year.

And at the beginning of 2022, Diageo said a strong pound had negatively impacted earnings. But back then, the pound was worth around $1.35. Right now, with the pound at $1.11, it’s going to have a positive impact on earnings. 

Once again, a weak pound could push production costs up, but the impact of currency on sales should more than make up for it.

I’m looking to add Diageo to my portfolio soon as I see it benefiting from a weaker pound over the next year. I also like the group as it owns many well-known brands, including Johnnie Walker, Guinness, Baileys, and Smirnoff — giving it defensive qualities. Brands tend to outperform other products even when the economic situation gets tough.

The Veblen Effect

Most companies tend to suffer during times of high inflation. This is because firms have to raise prices to combat rising costs. As a result, consumer demand drops as spending power takes a hit. However, certain companies are an exception to this norm. This is known as the Veblen effect.

It takes place when consumers buy more expensive products even though similar, lower-priced substitutes are available. This is mainly due to the belief that higher price equates to higher quality. Consequently, the share prices of such companies tend to remain robust and outperform major indexes during these times.

Smoking hot

First of my list of stocks to buy is Imperial Brands (LSE: IMB). Up 13% against the FTSE 100‘s 7% decline, Imperial shares certainly look lucrative to me. While tobacco is a sunset industry, Imperial has managed to offer a range of ‘luxury’ lines through a number of its brands to offset its decline. These include the likes of JPS, Davidoff, and Gauloises, which have the potential to continue gaining market share in the premium space.

This has resulted in Credit Suisse and UBS giving Imperial shares ‘buy’ ratings. Additionally, the stock has seen an upgrade to its price target, from £23 to £25.50. This is an approximate 40% upside to its current share price, including dividends.

Although the state of Imperial’s balance sheet leaves much to be desired, its dividends are what cause investors to stick around. Analysts are expecting a 2% upgrade on the company’s next declaration date in November. This would bring its full-year dividend to £1.42 per share.

Nonetheless, there are risks associated with Imperial. While its stock performance year to date (YTD) is impressive, it may not be able to keep this up when the market starts to recover. But I’m primarily buying shares in the tobacco stock to benefit from its defensive attributes during this inflationary period, and to earn some passive income in both the immediate and long term.

Coated in luxury

Next on my list is Burberry (LSE: BRBY). The British brand is well positioned to take full advantage of the Veblen effect due to the appeal of its luxe products. Despite its YTD share performance stagnating, the company posted a decent set of Q1 numbers a couple of months ago.

Excluding China, the company saw substantial growth in the Americas and EMEIA regions as countries came out of lockdown. This performance can potentially be replicated as China slowly emerges out of lockdown too. Given that approximately half of the firm’s revenue stems from China, this could present a huge tailwind to its sales numbers in the quarters to come.

All that being said, Burberry shares still hold a ‘neutral’ rating with a price target of £19.28. While this doesn’t suggest too much of an upside, these targets haven’t taken that tailwind of China’s reopening and a weaker pound into account. For that reason, I’ll be looking to buy more shares for my portfolio if the price drops below £18.

I’m actually pretty bullish on Burberry, and there are several reasons for this. So let’s take a closer look at the luxury fashion house’s fortunates and explore whether it might be right for my portfolio.

Three year trend

If I’d invested £1,000 in Burberry three years ago, today I’d have £830, plus dividends — however, the current dividend yield is only 0.68%. So clearly, that’s not a great return. In fact, it pretty poor.

Burberry struggled during the early days of the pandemic as China, its main market, went into lockdown. I was fortunate to buy the stock near its nadir and sold it almost exactly a year later when the stock passed through 2,100p — it’s not like me to sell so soon.

But in 2022, China is posing more problems. Cities have been in and out of lockdown throughout the course of 2022, and economic growth has slowed. In July, the retailer said sales fell 35% in mainland China because of Covid-19 restrictions and store closures.

A change at the top

Earlier this week, Burberry announced that Tisci had decided to leave after almost five years, during which he spearheaded Burberry’s creative transformation. Despite Tisci being well respected in the industry, the announcement pushed the share price higher.

Tisci will be succeeded by Briton Daniel Lee, who will join the group on October 3. Burberry said Lee will be based at the company headquarters in London and report to chief executive Jonathan Akeroyd. Lee had been the highly-respected creative director of the Italian luxury fashion house Bottega Veneta from 2018 to 2021.

Outlook could be improving

Burberry said retail revenues for the 13 weeks ended 2 July came in at £505m, up 5% at reported currency and unchanged at constant exchange rates. In fact, excluding mainland China, comparable store sales grew 16%, while comparable store sales across Europe, the Middle East, India, and Africa grew 47% year on year.

And while the Chinese economy could be in a healthier place, Covid-19 restrictions are becoming easier on business. Before the pandemic, around 40% of Burberry’s sales were from China, or Chinese tourists buying abroad. 

Moreover, luxury goods companies tend to be bombproof against inflationary and even recessionary environments. The profile of the consumer is often insulated from the economic constraints that impact many others during economic downturns.

Burberry should also benefit from the weaker pound. The yuan and the dollar have both gained considerably on the pound this year and this should lead to inflated GBP earnings. A weak pound could push costs up but, on the whole, I see a net benefit here.

As a result, and at the current price, I’d add Burberry to my portfolio.

Billionaire investor Warren Buffett once said: “Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.” Therefore, I’ve been looking for shares to buy now because I think value investing has a lot of life in it.

Interesting situations

Meanwhile, the stock market volatility over the past few days has thrown up some interesting situations. And I reckon most retail investors like me tend to take a contrarian approach to the markets. 

That can be a good idea because it’s difficult to achieve decent returns when stocks are over-valued. However, focusing on valuation alone doesn’t guarantee success. All shares and business come with risks as well as positive potential — even cheap-looking ones.

Nevertheless, the current bout of market weakness could be an opportunity. For example, I like the FTSE 100‘s Burberry (LSE: BRBY), the global luxury goods manufacturer, retailer and wholesaler. 

Change can invigorate businesses

Last week, the company said its chief operating and financial officer will step down in April 2023. And today it announced the appointment of a new chief creative officer. Therefore, two senior members of the management team are changing. 

Is that a worrying development? I don’t think so. The search is on for the next chief operating and financial officer. But change at the top of an organisation can often lead to renewed drive and ambition in company boardrooms.

I reckon Burberry has a good chance of making decent operational progress in the years ahead. And that’s why I recently added some of the shares to my diversified, long-term-focused portfolio. Although, as with all shares, positive outcomes are not certain.

Another FTSE 100 company I’m keen on is Airtel Africa, the provider of telecommunications and mobile money services across the African continent. In July, the company posted a decent first-quarter results report trumpeting “double-digit revenue growth, margin and earnings progression and further strengthening of the balance sheet.”

Potential for growth ahead 

Looking ahead, chief executive Segun Ogunsanya said the company expects growth in the near-term “ahead of the market”. And in the longer term, there are opportunities for “sustainable profitable growth”. 

Meanwhile, in the FTSE 250, I reckon the prospects for Greggs look appealing. In August, the food-on-the-go retailer delivered a robust set of half-year results. And I’m optimistic the firm’s strong brand and value customer offering will help it trade well ahead. The economic times are tough for many people. But my guess is regular trip to Greggs will be among the last habits they stop.

On top of that, Greggs has a vibrant expansion programme in full swing. So, I see its prospects as attractive across all time frames. Of course, despite my optimism I could be wrong. And Greggs could struggle to make progress in today’s harsh economic environment. Nevertheless, I bought some of the shares recently for my long-term portfolio.

And while the market isn’t universally down — some areas like oil, energy and mining have done pretty well this year — a dip is good time to buy those stocks I really believe in.

So here are two companies that I’d buy for a future recovery when I have some spare cash.

Barratt Developments

Barratt Developments (LSE:BDEV) is down 40% over the past year. However, this belies some pretty positive performance data.

The firm recently said that in the year to 30 June, adjusted pre-tax profit grew 14.7% to a record £1.05bn, with revenues up 9.5% at £5.27bn, as completions increased 3.9% to 17,908. That completions figure is broadly in line with pre-pandemic levels.

The firm is offering a sizeable 8.1% dividend yield, which appears to be well covered by earnings. It’s also well-supported by Barratt’s £1.1bn net cash pile.

Looking forward, and based on current market conditions, Barratt is targeting total home completion growth of 3-5% in FY23, to between 18,400 and 18,800 homes.

So there are many positives. But why is the share price down? Well, things aren’t looking too rosy for the housing market right now. Interest rates are rising and could reach as high as 4% in 2023. And that will likely push house buyers to defer their purchases.

But, along with the cost-of-living crisis, this means house prices are unlikely to increase. Berenberg contends that house prices will remain flat over the next year while cost inflation will sit at 5%. Therefore, it’s likely that margins might suffer over the next year.

Despite this, I see Barratt as a good place to put my money right now. The stock hasn’t traded this low for nearly a decade, and when the housing market recovers, I think it could explode.

Burberry

Burberry (LSE:BRBY) is suffering this year and that’s largely a result of lockdowns in China. In its first quarter report, the luxury fashion house said that same-store sales increased just 1% year-on-year as sales were impacted by lockdowns across mainland China. The stock is down only 3% over the year, but around 15% since February.

However, Burberry remains upbeat on its ability to continue growing. The business is targeting high-single-digit percentage revenue growth and 20% margins “in the medium term”. And analysts are positive too. The City expects earnings to advance by almost 27% in the current trading year to April 2023.

China really is an important part of the Burberry business. Excluding mainland China, comparable store sales grew 16% in the first quarter. The big question is, will China continue with its lockdowns, or adopt a more business-friendly approach? I’m certainly hoping for the latter.

A recession could create challenges for retailers like Burberry but, equally, luxury fashion is often fairly resilient. Despite the economic headwinds, I’d buy Burberry with the expectation that the business will really move forward as China opens up from Covid. A weak pound should also inflate GBP earnings.

Publishing

For example, I’m keen on illustrated book publisher Quarto (LSE: QRT). The company has UK and US divisions. And with the share price at 157p, its market capitalisation is around £66m.

One thing for me to bear in mind is the company’s president, Chuk Kin Lau, owns just over 50% of the shares. So, he has a controlling interest in the enterprise. But I’m comfortable with that setup.

In March, the company delivered a pleasing set of numbers for the 2021 trading year and an upbeat outlook statement. But, as with all businesses, there is no guarantee of further growth in the current year with all its economic and geopolitical challenges.

Nevertheless, I’m happy to own some of the company’s shares for the years ahead. And I’m looking forward to the half-year results report due on 30 August to learn more about operational progress.

Meanwhile, the price-to-earnings rating is running around seven. And I see that valuation as undemanding. However, the company doesn’t currently pay a shareholder dividend.

Mining services

I’m also holding mining services company Capital (LSE: CAPD). With the share price near 91p, the market capitalisation is around £174m. The business earns its living providing drilling, mining, maintenance, and geochemical laboratory solutions to customers in the minerals industry. And it focuses on the African markets. 

Last week, the company posted a robust set of interim numbers covering the period to 30 June. And looking ahead, the directors raised their revenue guidance for 2022. 

Executive chairman Jamie Boyton said the underlying demand in the market is “encouraging”.  However, he expects some seasonal slowdown through the third quarter. But he pointed to a “buoyant” tender pipeline across drilling, mining, and laboratories as a reason for optimism.

Set against City analysts’ expectations, the forward-looking earnings multiple is just above four for 2023. And the anticipated dividend yield is about 4.3. I see the valuation as attractive despite the cyclical risks inherent in the sector.

Luxury goods

Finally, I decided to take a little slice of Burberry (LSE: BRBY) into my portfolio recently. And my shares sit in my account as part of my diversified long-term portfolio. The company operates as a global luxury goods manufacturer, retailer, and wholesaler. And as with all my recent stock purchases, I’m looking beyond the short-term economic challenges the world faces.

In July, with the first-quarter trading update, the company delivered an encouraging outlook statement. Sales in mainland China had been affected by ongoing lockdowns. But the directors said performance there had been “encouraging” since the company’s stores reopened in June. And the business is targeting high-single-digit percentage revenue growth and 20% margins “in the medium term”.

Meanwhile, City analysts expect earnings to advance by almost 27% in the current trading year to April 2023. And with the share price near 1,777p, the forward-looking earnings multiple is just over 15. There’s also a dividend to collect, yielding around 3%.

However, it’s possible for operational progress to stall and the company may miss its estimates. There isn’t much slack in the valuation to allow for setbacks. Nevertheless, I’m happy to hold my shares for the long haul to see if the company can progress its expansion plans.

A safe haven?

Luxury goods can be a safe haven in a recession as wealthy shoppers continue to spend. High-end fashion group Burberry (LSE: BRBY) isn’t the cheapest FTSE 100 stock to buy today, but I think it could be one of the best.

Demand is bouncing back as loyal customers return to the group’s stores after the pandemic. New lines such as the Lola handbag range are said to be performing well.

I admire Burberry’s high profit margins, strong brand and long history. The dividend has not been cut since its 2001 flotation and I think further growth is likely.

I think the main risk with Burberry is that it might fall out of favour with Chinese shoppers, who account for a sizeable chunk of sales. Lockdowns in China have kept stores shut and limit travel, but over the next six months we should find out more.

Burberry shares currently trade on 15 times forecast earnings, with a 3% dividend yield. I see the stock as a long-term buy.

A safe 8% yield?

My next pick has one of the highest dividend yields in the FTSE 100. Housebuilder Barratt Developments (LSE: BDEV) has earned a five-star HBF rating for the last 13 years. Sales have doubled over this period and profits have soared.

Despite this strong record, Barratt’s share price has fallen this year as the market has priced in a recession. As a result, the shares now offer a forecast dividend yield of 8.2%.

How safe is this payout? Barratt’s recent market update for the year to 30 June reported “strong nationwide demand” and a solid order book.

This year’s dividend should be covered twice by earnings and Barratt has plenty of cash.

The problem is that if the housing market is going to slow, it’s only just starting to happen. It’s too soon to know how housebuilders will perform over the next couple of years.

Personally, I don’t expect a major housing crash. I think Barratt’s 8% yield could be safe.

This FTSE 100 stock is recovering

Packaging group Mondi (LSE: MNDI) was hit harder than some rivals by the invasion of Ukraine. The group previously generated about 20% of its earnings in Russia.

Fortunately, the rest of the business is performing well. Mondi has been able to pass higher costs onto customers, protecting its profit margins. The group’s net profit for the first half of 2022 was €536m, just 3% lower than during the final six months of 2021.

Mondi has several characteristics I look for in a dividend stock. It’s highly profitable, generates plenty of cash and has relatively low debt levels. In my view, these factors combine to make the dividend safer than some peers.

The short-term outlook could be uncertain, as a widespread recession could see demand for packaging slump. However, I think these risks are probably priced into the stock. Mondi shares trade on less than 10 times forecast earnings and offer a 4% yield.

Mondi is on my list as a dividend buy.

Lloyds

As the UK’s biggest lender, I believe Lloyds (LSE: LLOY) shares are a sound choice for my portfolio. It earns its money from the difference in providing and earning interest from loans. This is otherwise known as net interest income.

Interest rates are expected to go as high as 3% by 2024 as the Bank of England tries to combat inflation. As a result, the high street bank should get a top-line boost from higher lending costs, while benefiting from lower interest paid to customers. With enough cash to set aside for bad loan provisions, Lloyds doesn’t need to increase its savings rate to bring in more cash, thus allowing it to increase its profits. This was evident in the company’s latest half-year results, which saw it recording excellent numbers.

It’s worth noting, however, that the majority of its income stems from mortgages. With house prices and mortgage approvals starting to decline, it remains a possibility that Lloyds’ revenue could be impacted. Nonetheless, analysts think that the increase in rates should offset any declines for the time being. In fact, Lloyds stock is rated a buy as its dividend is also expected to increase. It has an average price target of 64.33p, or a 40% upside.

SSE

Energy prices have been the main culprit behind sky-high inflation. That’s because energy prices are at their highest levels since 2009. As such, I think SSE (LSE: SSE) is a share to buy for my portfolio given the circumstances.

When wholesale energy prices go up, energy suppliers increases their rates to cover the extra costs. This has allowed companies like SSE to benefit, with its top and bottom lines seeing modest increases. As a matter of fact, its profit and loss account saw its best numbers in FY22, which is why its shares are up 9% this year.

The latest inflation report shows that energy prices rose 3% on a month-on-month basis. And with a higher price cap expected in October, SSE should benefit from this. After all, its latest trading update indicates that it expects adjusted earnings per share (EPS) of at least £1.20 for FY23. This would bring its EPS to its highest level in five years.

Additionally, its dividend yield of 4.7% is rather modest and is expected to rise given its most recent increase in payout, from 25.5p to 60.2p. SSE shares are rated a moderate buy with an average price target of £20.78.

Unilever

Next on my list is Unilever (LSE: ULVR). Its share price has been rather volatile this year. Nevertheless, it has recovered by 5% since its reported its H1 numbers. Its shares are now only down by 1% on a year-to-date basis.

The fast-moving consumer goods conglomerate produces beauty products and personal care, foods and cleaning agents. Its brands include Lynx, Ben & Jerry’s, Dove, and many more. These are household names and have tremendous pricing power, given the inelastic demand surrounding most of its products. This is strongly reflected in the revised outlook given by CEO Alan Jope, when he improved the firm’s guidance.

Our guidance for underlying sales growth in 2022 was previously at the top end of a range of 4.5% to 6.5%. We now expect underlying sales growth to be above that range, driven by price with some further pressure on volume.

Unilever CEO Alan Jope

Nevertheless, it should be noted that Unilever shares are more of a defensive play to protect from potential downside at the moment. Analysts are forecasting an average price target of £40.81, which only means a potential 3% gain if I were to buy shares now.

Burberry

Burberry (LSE: BRBY) shares are a good inflation hedge, in my opinion. The brand’s status as a luxury retailer allows it to pass on many of its costs to consumers given the nature of its target market. This was confirmed by CFO Julie Brown in its Q1 trading update, with a positive outlook for the company.

The FTSE 100 retailer has benefited from the return of global travel, with a substantial amount of its sales coming from tourists. It saw its like-for-like sales numbers grow by 1% on an annual basis, despite lockdowns in key revenue driver, China. Excluding China, sales figures were actually rather impressive. They were 16% higher in Q1 overall, with EMEIA boasting impressive 47% growth. Moreover, the company’s most profitable products (leather goods and outerwear) also saw double-digit growth.

That being said, I should point out that China remains the firm’s achilles heel for the moment. With its government sticking to its zero-Covid policy, I don’t expect sales figures from that region to see an uptick any time soon. This is why its average price target currently sits at £19.34. Therefore, this is more of a long-term investment with a higher upside once China’s retail sales fully recovers.

Tesco

Last on my shopping list are Tesco shares (LSE: TSCO). Given that its core products are consumer staples, I’m expecting Tesco shares to be robust in a recessionary environment. It’s also been steadily increasing its dividend payouts, which should serve as an added benefit.

As the market leader in the UK supermarket sector with more than a quarter of the market share, I think Tesco will be able to outperform its peers. Its Aldi price match across hundreds of items has been a success so far. According to the last several Kantar grocery reports, the supermarket leader has seen its market share remain relatively robust. It has also managed to outperform most if its competitors with higher sales figures. And its Q1 trading update showed its strength in the industry.

Having said that, sales figures are expected to come in slightly lower for the year. The grocer no longer enjoys the tailwinds of the pandemic and faces slower sales as a result of high inflation. Even so, I still think Tesco can utilise its strong supply chain and relationship with customers to match last year’s stellar performance. Analysts seem to share the same sentiment, rating Tesco shares a strong buy with an average price rating of £3.19.

I’ve been hunting for some of the best shares to buy now with £2,000. For example, I like the look of social housing energy services company Sureserve (LSE: SURE).

In May, its half-year results report had the headline: “Continued momentum, high revenue visibility and strong order book drives confident outlook for full year”.

High earnings visibility

The figures were impressive. Revenues, profits and the order book were all up by meaty double-digit percentages compared to a year earlier. Non-executive chairman Nick Winks said the business benefits from “high” visibility of revenue. And that’s because of its long-term local authority and housing association contracts.

Winks acknowledged that general economic headwinds exist affecting the company’s costs. But he was “confident” in the prospects of the business for the rest of the trading year to September. City analysts predict an uplift of almost 43% in earnings for 2022 and a further rise of nearly 8% in 2023.

Although any business can miss its estimates, the forward-looking earnings multiple is just below 10 for 2023. I think that’s undemanding. However, Sureserve doesn’t currently pay a shareholder dividend. But I like the way the company is building on previous earnings growth and expanding organically and via bolt-on acquisitions.

Profitable international expansion

I’m also keen on global luxury goods manufacturer, retailer and wholesaler Burberry (LSE: BRBY). In July’s first-quarter trading update, the company revealed that lockdowns in China had affected the results. Comparable store sales increased by just 1% year-on-year. However, excluding mainland China, comparable store sales grew by an encouraging 16%.

The directors said the macro-economic environment is causing some near-term uncertainty. However, the performance in China has improved since stores reopened in June. 

City analysts expect earnings to increase by almost 27% in the current trading year and by just over 4% the following year. Meanwhile, set against those expectations, the forward-looking earnings multiple is just below 15. That’s with the share price near 1,793p. And the anticipated dividend yield is above 3%. 

It’s possible for Burberry to run into operational setbacks ahead. But the company’s earnings are on an upward trajectory. And I’d buy some of the shares to hold for the long term as operational progress unfolds in the years ahead.

Growing markets 

My final pick is Morgan Advanced Materials (LSE: MGAM). The business manufactures specialist products using carbon, advanced ceramics and composites. And in July, the first-half results report revealed solid progress in revenue and adjusted earnings.

The directors said the full-year figures would likely come in at “the top end” of analysts’ previous forecasts. And chief executive Pete Raby said the “robust” revenue expansion arose because of growing markets and the firm’s strategy. However, he warned that there will likely be a “moderation” of growth rates in the second half because of challenges in the economy.

City analysts expect earnings to grow by just under 15% in 2022 and by almost 6% in 2023. Meanwhile, with the share price near 305p, the forward-looking earnings multiple is just below an undemanding 10 for 2023. However, that could work out higher if the company misses its estimates because of operational or trading difficulties.

Nevertheless, I’d take the chance with a long-term hold while collecting the dividend, which is yielding above 3%.