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Scottish Mortgage Investment Trust 

What it does: Scottish Mortgage invests in a global portfolio of companies through a mix of listed and unlisted shares.  

By Charlie Keough. My top British stock for August is Scottish Mortgage Investment Trust (LSE: SMT). I’ve long been a fan of this equity. And with its share price taking a hit this year, I think this offers a great time for me to buy. 

The management team aims for growth over a five-year period. And while past performance is no guarantee of future returns, the last five years have seen the trust return around 100% to shareholders.  

Scottish Mortgage has suffered this year due to its focus on growth stocks. While these may continue to stall in the near run, over a more extended period I think the trust has the potential to provide me with some substantial returns (like it did when buying Tesla in 2013). 

Ongoing struggles in China, along with the likely potential of inflation continuing to dampen investor confidence, could see the stock slip. However, I’d buy the stock in August as a long-term hold.  

Charlie Keough does not own shares in Scottish Mortgage Investment Trust. 

Premier Foods 

What it does: Premier Foods manufactures a broad range of foods and ingredients like cakes, custard, cooking sauces and gravy.

By Royston Wild. Purchasing shares in food producers like Premier Foods (LSE: PFD) has traditionally been a popular play for investors during tough economic times. Food is one thing that people don’t stop spending on when times get tough. 

But businesses like this aren’t risk-free at the moment. Spending is plummeting at an alarming rate as the cost-of-living crisis worsens. The Office for National Statistics says that 50% of Brits are buying less food when doing the food shop. 

But in this climate I’m encouraged by how resilient trading at Premier Foods has remained. Revenues here rose 6% in the 13 weeks to 2 July, meaning the business remains on track to meet full-year expectations. 

I like Premier Foods because it sells food at the value end of the market under brands like Batchelors. Furthermore, I appreciate the excellent brand power of products like Mr Kipling cakes and Homepride cooking sauces. Volumes of beloved labels like these tend to remain more stable during downturns.

Premier Foods trades on a forward P/E ratio of just 10.2 times. I think this makes it a top value stock to buy in August. 

Royston Wild does not own shares in Premier Foods. 

Experian

What it does: Experian is a British technology company that specialises in consumer credit data.

By Edward Sheldon, CFA. FTSE 100 company Experian (LSE: EXPN) has seen its stock price pull back in 2022 and I think this has provided an attractive buying opportunity in August.

A trading update posted in mid-July showed that the company has momentum at present. For the three-month period to 30 June, total revenue was up 7% year on year. Meanwhile, looking ahead, the company said that it expects total revenue growth of 8-10% for the year ending 31 March 2023.

As for the stock’s valuation, it seems quite reasonable to my mind. With analysts currently expecting the group to generate earnings per share of around $1.36 this year, the P/E ratio here is around 25. I don’t see that as excessive given Experian’s market dominance, growth rate, and high level of profitability.

Of course, if the tech sector continues to experience weakness, Experian shares could underperform in the near term. Taking a long-term view, however, I see the risk/reward profile here as attractive.

Edward Sheldon owns shares in Experian.

International Consolidated Airlines Group

What it does: This company is an airline conglomerate that operates across the entire globe. It owns a number of well-known airlines, including British Airways, Aer Lingus, and Iberia.

By Andrew Woods. International Consolidated Airlines Group (LSE:IAG) was battered as the pandemic made its way around the world. This was primarily because countries shut their borders and virtually all commercial flights were grounded.

The result was that IAG swung to a €7.8bn pre-tax loss in 2020 as its income sources became ever more limited. This forced the firm to issue new shares to raise capital in the midst of the crisis.

In 2021, however, pre-tax losses more than halved to €3.5bn. During an update for the first three months of 2022, it stated that it may even return to profitability in the middle of this year. In those first three months, revenue climbed to €3.4bn compared to €963m for the same period in 2021.

Although passenger capacity is improving, recent cancellations due to staff shortages could delay progress. Nevertheless, I think August may reveal that IAG has once again hit calmer skies and I’ll be adding more shares if it does.

Andrew Woods owns shares in IAG.

Fresnillo 

What it does: Fresnillo is the world’s largest primary silver producer and Mexico’s largest gold producer, with seven operating mines. 

By G A Chester. Fresnillo (LSE: FRES) has been through a difficult few years. Covid disrupted its operations quite severely at times. And the introduction of new labour legislation last September also presented challenges. 

However, management recently reported a solid second quarter of production in line with its expectations. It said this was despite some continued impact from the pandemic. 

The company’s also made good progress in adapting to the Mexico labour reform. This required it to internalise a high proportion of its contractor workforce. It said its recruitment and training campaigns are proving effective and that it should complete the process by the end of the year in its underground mines. Meanwhile, it said its open pit mines are now fully staffed. 

With operations normalising, a Covid-delayed major growth project ready to ramp-up, and a good pipeline of further development projects and exploration prospects, I think Fresnillo is ripe for a recovery. 

G A Chester does not own shares in Fresnillo. 

Ibstock

What it does: Ibstock is the UK’s leading manufacturer of clay bricks and concrete products used by the construction industry.

By Zaven Boyrazian. The property market is notoriously cyclical. And with the Help-To-Buy scheme coming to an end soon, it’s possible for a downturn to be arriving soon. However, when it comes to long-term demand, the need for housing isn’t going anywhere. And that’s terrific news for my top stock to buy for August, Ibstock (LSE:IBST).

The brick manufacturer has suffered quite a few disruptions from Covid-19. However, those woes seem to be in the past and business has begun to ramp up again.

Its latest interim results demonstrated double digit growth for revenue and profits thanks to an uptick in sales volumes. Meanwhile construction for its new Atlas and Aldridge redevelopments continue to be on track for completion for the end of 2023.

Once brought on-line, these facilities will expand the firm’s manufacturing capacity by 115 million bricks per year. And given Brexit has made importing bricks far more expensive, the firm may be in a prime position to capitalise on the opportunity.

Zaven Boyrazian does not own shares in Ibstock.

Moneysupermarket.com

What it does: Moneysupermarket.com operates price-comparison sites for money, home services, money, insurance and other products

By Paul Summers: I’ve been banging the drum on Moneysupermarket.com (LSE: MONY) for some time now. Unfortunately for me, other investors haven’t agreed with my bullish view and the share price is still down 18% in the last year. The inability of consumers to switch energy suppliers hasn’t exactly helped.

Despite this, I’m in no mind to sell my holding. Quite the opposite.

Earlier this month, the company stated that revenue had grown 19% over the first six months of 2022. Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) rose 10%, which was ahead of expectations. The interim dividend was maintained too.

With consumers trying to save money where they can, I think this positive momentum can continue. At just below 16 times earnings as I type, the stock still trades at an attractive valuation and there’s a 5.7% yield in the offing if the full-year payout is kept steady.

Paul Summers owns shares in Moneysupermarket.com

Airtel Africa

What it does: Airtel Africa is a leading operator of telecoms networks and mobile money services in Africa.

By Roland Head. Shares in Airtel Africa (LSE: AAF) have doubled since the company floated on the London Stock Exchange three years ago. I think further gains are likely.

Recent first-quarter results showed revenue up by 13% to $1,257m during the three months to 30 June. This growth was mainly due to a 25% increase in mobile money revenue and a 20% rise in data revenue.

Many African countries lack the formal banking networks and fixed-line telecoms services we take for granted. I think that demand for internet and financial services will continue to be driven by rising mobile usage.

One possible risk is that Airtel Africa carries a fair amount of debt — $3,056m at the last count. However, debt is falling, and cash generation is strong.

Airtel shares trade on 11 times forecast earnings, with a 3% dividend yield. I see the stock as a long-term buy in August at this level.

Roland Head owns shares in Airtel Africa.

Compass Group 

What it does: Compass Group is a FTSE 100 global leader that runs workplace canteens for thousands of organisations across 44 countries.  

By Harshil Patel. Given soaring food prices, some might be surprised that I think it’s a good idea to buy food services provider Compass Group (LSE:CPG). But it’s rising food and energy costs that are pushing more organisations to outsource this function.  

As a specialist in the field, Compass has a better chance to provide catering functions at lower cost and greater flexibility. 

Compass says that it’s winning new business. And that has helped it to raise its sales growth predictions for the second time this year. I reckon it’s a trend that could continue into next year.  

Whereas finding the right staff is a challenge plaguing many organisations right now, Compass seems to be managing relatively well.  

Now, as it’s a physical business, any further pandemic-related disruptions could affect earnings. However, all things considered, I’m banking on its strong cash flow, earnings growth and dividend growth to provide me with solid shareholder returns. 

Harshil Patel does not own shares in Compass Group. 

But one thing to note is that the stock market tries to anticipate what the economy might look like in six-to-nine months.

So despite the doom and gloom we might expect right now, there could be ‘no-brainer’ opportunities lurking in this large-cap index with lots of post-recovery potential.

A FTSE 100 top pick

I’d start with catering giant Compass Group (LSE:CPG). It’s a global leader in providing food services to thousands of organisations spanning 44 countries. As an example, it supplies many workplace canteens.

But with energy and food prices soaring, why would I even think about buying shares in a catering company? Well, something interesting is happening in this space.

Faced with rising costs and staffing challenges, many companies and organisations are moving to outsource catering operations to larger, more efficient specialists like Compass.

It looks like a blessing for the British caterer. A string of new business wins has already helped Compass to raise its revenue growth forecast for the second time this year. And it expects this trend to continue.

Quality business

Bear in mind that attracting the right staff remains a challenge. And as a mainly physical business, the pandemic caused significant disruption. Any further Covid outbreaks could be a cause for concern for the company and its shares.

Overall though, I like what I see and would buy these shares today. It’s a quality business with a double-digit return on capital employed. And with earnings growth, dividends and a £500m share buyback programme, I reckon I’ll be sufficiently rewarded as a shareholder.

Banking on it

The next stock I’d buy is Lloyds Banking Group (LSE:LLOY). Banking shares wouldn’t normally be my go-to option when facing an economic slowdown.

But this is no ordinary recession. Against a backdrop of soaring inflation, the Bank of England has embarked on a series of interest rate hikes.

Lloyds is benefiting from these higher interest rates. It expects its net interest margin to be greater than 2.8%. That’s up from 2.5% a year earlier.

Net interest margin is a key measure for banks, and it’s essentially the difference between the interest it earns on loans and the interest it pays on customer deposits.

For the six months to 30 June, net income gained 11% to £8.5bn. And strong performance in the first half of the year resulted in Lloyds enhancing its guidance for 2022.

6% dividend yield

A word of warning, however. Any signs of a deeper recession would be a cause for concern, in my opinion. It could result in a drop in economic and borrowing activity. A fall in overall lending might offset any benefits of higher interest rates for this domestic bank.

That said, I reckon interest rates will be raised further this year and Lloyds should benefit. And in addition to its juicy 6% dividend yield, I think I’ll be rewarded with a much higher share price in the coming years.

Catering services

As a quick reminder, Compass Group is one of the world’s largest contract caterers. It has operations in approximately 45 countries across the globe. It offers its services to a multitude of sectors and locations such as schools, offices, and factories as well as travel companies. Furthermore, it owns and runs coffee shops, bakery stores, and vending machines too, which diversify its offering.

So what’s the current state of play with the Compass Group share price? Well, as I write, the shares are trading for 1,886p. At this time last year, the stock was trading for 1,484p, which is a 25% return over a 12-month period. I believe Compass Group shares have climbed due to pandemic restrictions easing.

Challenges

Firstly, macroeconomic headwinds could hamper Compass’ growth, performance, and returns in the near future. Soaring inflation, the rising cost of raw materials, and the supply chain crisis could impact it negatively. Rising costs could squeeze the profit margins that underpin performance, shareholder returns, and investor sentiment. Next, supply chain issues could have an impact on its operations and sales too.

Despite restrictions easing, alternative ways of working, educating, and travelling could have a negative impact on demand in the long term. Businesses may feel they do not need to contract catering as much anymore. This is something I will keep an eye on in future performance updates.

The positives and my verdict

So to the positives then. I noted that pre-pandemic, Compass had a consistent track record of performance. I do understand that past performance is not a guarantee of the future, however. Full-year results for 2022 are due later this year. These will provide me with insight into the company’s trading post-pandemic and whether it can regain pre-pandemic momentum. A Q3 update released today made for excellent reading, however. Sales momentum had pushed revenues above 2019 levels. Net new business levels increased and underlying margin levels increased too. Compass could be set to surpass pre-pandemic trading if these numbers are anything to go by.

Next, I am buoyed by Compass’ growth to date. It has become one of the largest in its sector. I believe its profile, presence, and diverse business model should set it in good stead to continue to perform and provide stable investor returns. It also has an eye on growth to continue expanding its reach above its current point.

I noted that Compass Group shares would boost my passive income stream through dividend payments. At present, its current dividend yield stands at 1.5%. I am aware that dividends can be cancelled at the discretion of the business at any time, however.

I like the look of Compass shares. The Compass Group share price has steadily climbed in recent months. This is a reflection of easing restrictions and performance heading back towards pre-pandemic levels. I believe it will continue to rise. The passive income opportunity is a bonus. I would add the shares to my holdings.

Compass Group is now the world’s largest contract caterer, operating in around 45 countries worldwide. The locations Compass Group offers its services include schools, offices and factories. In addition to this, it also runs an impressive variety of bakery outlets, coffee shops and vending machines. The company was founded in 1941 and currently has a market cap of over £27bn.

Compass pointing in the right direction

Compass Group saw a major decrease in short interest during January. On 15 January the total short interest was 376,800 shares; however, as of 31 January, the total short interest was 90,900 shares. The short interest decline was 75.9% in less than two weeks, and Credit Suisse Group raised its target price on Compass Group from $26.37 to $28.40 on 7 February. The company also recently disclosed a dividend yield of 0.71%, which will be paid to shareholders on 10 March.

Compass Group operates with large diversification geographically, as it is in many countries around North America, Europe and Asia in particular. It is now increasing operations in high-growth countries such as India, Brazil and Indonesia, as it sees larger growth potential in these countries over the decade ahead.

In addition to geographic diversification, Compass Group also offers wide sector diversification. Sector revenue was well diversified for 2021: healthcare was 33%, education was 18%, defence was 10%, business & industry was 31% and leisure was 8%.  Within these sectors Compass Group has many large business-to-business partnerships, including companies such as Canteen, ESFM, Eurest and Bon Appetit.

Sustainable contributions

In addition to the progress of boosting profits, Compass Group is also progressing with its sustainability goals for 2022. A ban on air freight of fresh fruit and vegetable produces will see a focus more on increasing the use of local and seasonal products. With fruit and vegetable produce being its second biggest buying category, this means it will significantly reduce its carbon footprint.

Reasons for concern

Even though the compass seems to be pointing in the right direction, there are still some reasons for concern. Firstly, its price-to-earnings ratio is currently 85.82, which is up from 76.16 for 2021. Also, its price-to-cash-flow ratio is up to 25.45 from 22.59 in 2021. In addition to this, Deutsche Bank downgraded Compass Group from a “buy” rating to a “hold” rating in a research note on 20 January.

The stock price currently seems to be in neutral “hold” territory for many Wall Street analysts at the moment. I’m watching this stock closely as it offers diversification across many high-growth economies in a wide variety of industries.

With that in mind, here are three FTSE 100 stocks that I believe can double my money over the next few years. I would be pretty happy to buy all of them for my portfolio, considering their potential. 

Banking recovery

The first company on my list is NatWest (LSE: NWG). I feel this enterprise has the potential to double my money for two reasons.

First of all, it looks cheap. Shares in the lender are changing hands at a price-to-book (P/B) value of approximately 0.65. This suggests that they could increase in value by 52% if the stock trades up to book value. 

Technically, if a company is profitable, it deserves to be valued at or around book value. As the bank’s profits increase, I think the valuation will improve. 

I think the stock could also boost my returns through a combination of profit growth and dividend income. The shares are set to support a dividend yield of 4.3% next year. This income, combined with a re-rating of the stock, could provide a total return of more than 100% over 10 years. 

However, if growth comes to a halt, these returns may not materialise. Another economic crisis is probably the biggest threat to the company’s growth. 

FTSE 100 recovery

Another company that I believe can double my money over the next decade is the catering group Compass (LSE: CPG). 

Historically, this business has grown through a combination of acquisitions and organic growth. Before the pandemic, the corporation was growing in excess of 10% per annum.

I see no reason why the group cannot return to its previous strategy. There are plenty more targets out there for the firm to acquire for its portfolio. What’s more, as humans will always need to eat, there will always be a need for its services. 

Assuming the organisation can continue to grow at 10% per annum, and its share price tracks this growth, the stock could double my money in just over seven years. 

Headwinds that could upset this target include inflation and rising wage costs. These could weigh on profit margins and demand for the company’s services. 

Incoming champion

The final company on my list is income champion Phoenix Group (LSE: PHNX). 

This corporation manages books of life and pension policies. Using economies of scale, it can push down operating costs and extract cash synergies from newly acquired books of business. 

As a result of this strategy, Phoenix is a dividend champion. The stock currently supports a dividend yield of 7.4%. If I reinvest this dividend year after year, I would be able to double my money after nine-and-a-half years, according to my calculations. 

The risk of using this approach is that the company decides to cut its dividend. This could upend my strategy. It would be challenging to double my money with the enterprise if it does go down this route. 

That said, there is also potential for capital gains. The stock is trading at a forward price-to-earnings (P/E) multiple of just 8.5, which looks cheap. 

FTSE 100 giant

Compass Group is one of the largest catering companies in the world. The UK-based firm has operations in over 50 countries and provides catering services for a multitude of events and companies. These can range from corporate events to film sites.

The pandemic was particularly bad for Compass Group and most of its business disappeared virtually overnight. Large gatherings and events were forbidden. With current reopening, however, there is a chance of it recovering. Pent-up demand could play a part too.

As I write, shares are trading for 1,515p. A year ago, shares were trading for 1,377p, which translates to a 10% return. Shares are up over 2% today after the announcement of results. So, what do the full-year results announced today tell me? Let’s take a look.

Results and outlook ahead

The results announced today covered the year ending 30 September 2021. I believe they show progress for Compass Group and that things are looking up.

Compass Group reported revenue fell from £19.2bn in 2020 to £18.1bn in 2021, which is a decrease of 6.3%. Operating profit increased by 55% from £522m in 2020 to £811m in 2021, which is good news. Free cash flow increased by over 200% and a dividend of 14p per share was declared. Compass Group cancelled the dividend in 2020 in light of the pandemic and market crash, as did many other FTSE 100 stocks.

I was particularly buoyed to read that Compass Group reported record new business wins worth £2.1bn. Furthermore, client retention was over 95%. Overall revenue was at 88% of 2019 levels, prior to the pandemic.

I believe all these signs point to the fact trading is returning to normal for Compass Group and pent-up demand and reopening have helped. Compass Group stated in its results that a major growth push was a priority moving forward to surpass pre-pandemic trading, which is pleasing to read.

Risks and my verdict

Compass Group has two main risks in my opinion. Firstly, the pandemic may have changed working practises forever. This could result in lower demand for catering services for larger companies and events. If this were to be the case, surpassing pre-pandemic trading could be a pipe dream. Secondly, the virus has not disappeared. In fact, certain European countries have this week announced new lockdowns. If further restrictions come into force, progress could be hampered.

Overall, I like Compass Group for my portfolio and would buy shares at current levels. I believe it is an excellent FTSE 100 pick with a global presence. As a bonus, it pays out a dividend to make me a passive income. I do expect trading to surpass pre-pandemic levels once more and think it could be a lucrative addition to my portfolio in the long term.

With that in mind, here are my five favourite FTSE 100 stocks, four of which I currently own in my portfolio but would buy more of today. 

FTSE 100 beverage giant 

The first organisation on my list is the drinks giant Diageo (LSE: DGE). I like this company because it has a portfolio of internationally recognised alcohol brands, many of which fall into the premium segment. The premium nature of these products means the group can charge customers more, and we see this in its profit margins and return on invested capital. 

The group is also using its cash resources to buy up smaller brands and expand its footprint around the world. I think this combination of existing flagship brands and acquisitions can help support the company’s earnings and sales growth for years to come.

Some challenges the group might have to overcome going forward include alcohol bans, regulations, and higher costs, although it should pass these on to consumers through higher prices. 

Quality shares to buy

Another company in the FTSE 100 consumer goods sector that I own is the bleach-to-Durex producer Reckitt (LSE: RKT). This organisation experienced windfall growth last year thanks to the pandemic. Rising demand for cleaning products helped the firm’s Dettol brand clean up, although some other parts of the business suffered. 

As the pandemic has receded this year, demand for these products has declined, and Reckitt growth has slowed. Investors have been quick to turn their backs on the business as a result. 

However, I have been buying the shares because I am encouraged by management’s plans to invest more in growth. The new CEO has hiked the firm’s research and development budget and committed to reducing costs, which should help improve profit margins, giving the firm even more cash to spend on growth. 

This additional spending is one of the main reasons I believe Reckitt is one of the best shares to buy now. But like Diageo, the organisation is not immune to challenges. Rising commodity prices are pushing costs higher. This may offset some of the group’s cost savings and weigh on growth. 

FTSE 100 property champion

Moving away from consumer goods, I think British Land (LSE: BLND) is one of the best shares to buy now. I own this real estate investment trust (REIT) because it provides some diversification for my portfolio.

The company is one of the largest landlords in the country, owning a portfolio of commercial, industrial and office assets around the UK. Over the past few years, as the retail industry has struggled to fight off the e-commerce threat, British Land has been selling off some of its retail assets and reinvesting the proceeds in areas of the market where it believes there are more opportunities.

One of its most extensive development opportunities currently is Canada Water. The east London development is said to be one of the largest redevelopment schemes in the country, with thousands of homes and three million square feet of retail and office space. 

This development is set to be a huge growth opportunity for British Land and its investors. It is not the only reason I own the company (I am also attracted to the stock’s 3% dividend yield), but it is a major one. 

One challenge the group will likely face in the next year or so is higher interest rates. This headwind will increase the cost of the REIT’s debt and could impact property values.

Insurance giant 

One of my favourite stocks in the blue-chip index is insurance giant Admiral (LSE: ADM). Insurance can be a risky business. But Admiral really does know what it is doing. Over the past few decades, the company has grown from a start-up into one of the UK’s largest financial services groups. It is laser-focused on high-quality customer service and offering value for customers through deals such as multi-buy insurance policies.

Further, its decision to give customers refunds as there were fewer vehicles on the at the height of the pandemic last year has paid off. Customer numbers jumped in the first half of 2021. 

Going forward, the company will focus on its international divisions. That will help diversify the enterprise away from its home market. This growth potential is the main reason why I own the stock in my portfolio and think it is one of the best shares to buy in the FTSE 100. 

Of course, expanding overseas is not without risks. The company could end up going into a market it does not understand, which could lead to significant losses. 

Recovery investment

The final FTSE 100 company I want to highlight in this article is the catering organisation Compass (LSE: CPG). As the largest catering group globally, the business has a substantial competitive advantage over its peers. 

Catering is a low-margin, high-cost business, and economies of scale can help keep costs low. That is why Compass has been so successful in taking over the market. Economies of scale have helped the firm take over smaller peers, which boost the group’s bottom line, freeing up more capital for profit and so on. 

Unfortunately, despite the company’s advantages, it could not escape the pain the rest of the catering industry felt last year. It is now in recovery mode, and that is why I would buy the stock for my portfolio as a FTSE 100 recovery play. 

Some challenges it may have to overcome in the next few weeks and months include further coronavirus restrictions, rising costs and weak demand. 

FTSE 100 bargains

The first stock on my list is the broadcaster ITV (LSE: ITV). Shares in the company collapsed when advertisers pulled their spending on its platforms at the beginning of the pandemic. However, even though spending has since recovered, the stock doesn’t seem to be recognising the recovery. 

According to the group’s latest trading update, total revenue for the three months to the end of March increased 2% compared to the same period a year ago. Advertising spending for the first four months of 2021 was up 6%. Meanwhile, its Studios production arm saw revenue increase 9%. 

While these figures aren’t fantastic, they show the company’s heading in the right direction. Unfortunately, it also faces several risks and challenges that could hold back recovery in the months ahead. These include competition with US streaming giants and another potential coronavirus wave, which could, once again, lead to a fall in advertising revenue. 

However, the company is trying to get around these issues. It’s investing more on its online business, digital advertising and venture capital arm. 

Therefore, despite the above risks, I think the outlook for the FTSE 100 business is looking up. With shares in ITV still trading 23% below their year-end 2019 level, I’d add to my position in the stock today. 

Market recovery 

Like ITV, the coronavirus pandemic slammed into Compass (LSE: CPG) like a hurricane. The company, which is one of the world’s largest catering groups, saw much of its business evaporate overnight. Important to its core business, Compass caters to events such as conferences and film production. 

But now, the enterprise is making headway in its recovery. For the six months to the end of March, the group’s revenue fell 30% from the year-ago period, and profits decline 65%. Nevertheless, towards the end of the period, the firm’s operating profit margin recovered to 4.2%, up from 2.7% in the first quarter. 

Further, new business wins increased by around 20%, and 95.6% of customers stayed with the company. 

However, the FTSE 100 company continues to face some significant risks to its recovery. Large events around the world are only returning gradually, and other variants of coronavirus could emerge, which would setback reopening plans. 

There’s also a risk demand for the company’s services may never return to pre-Covid levels if the pandemic drives lasting changes in working practices.

Still, despite these risks and challenges, I’m encouraged by the company’s size, progress and potential. It’s also encouraging to see the business is generating cash and profits, which management can use to buy growth through acquisitions, or pay down debt. 

After taking this growth potential into account and considering the fact that the stock is trading around 21% below its year-end 2019 level, I’d buy shares in the FTSE 100 firm for my portfolio today. 

Top British stocks like FTSE 100-listed Compass Group (LSE: CGP) are gearing up to benefit from the recovery. Its share price is up 44% over the last year, although growth has flattened out in recent months.

Compass sells catering services to factories, offices, colleges, sports and entertainment facilities. Its business model was inevitably hit hard by the pandemic.

Top British stocks are fighting back

The bulk of its operations are focused on the US, where lockdowns are easing faster than in the UK. Recent Q3 figures showed revenues down a third to £8.4bn, but the future looks brighter, as canteens reopen and profit margins recover. Management has worked hard to keep costs down, and repaid £25m of furlough support.

Business is picking up and half of new contracts are for first-time outsourcers, up from a third pre-pandemic. The big risk is that the recovery stalls, while the working from home revolution could hit canteen demand, but for now Compass is pointing in the right direction.

Water company Pennon Group (LSE: PNN) is a top British utility stock and could balance Compass nicely. The pandemic has hit profits, which fell 12.3% to £215.3m last year. The group has also entered a tighter regulatory period. Pennon did report a full-year profit after tax of £1.8bn, but this was mostly down to the £1.7bn sale of Viridor.

Management is using the cash to pay down £1.1m of debt. It also plans to buy Bristol Water for £425m. It is also lining up a £1.5bn special dividend and £400m of share buybacks. It’s good to see Pennon rewarding loyal shareholders and this offsets the disappointment of last year’s dividend rebasing.

One downside is that its 1.9% yield is disappointingly low. It is set to rise by 2% above inflation for a five-year period but investors could get a better return elsewhere, for example, from top British dividend stock National Grid, which yields 5.3%. That leaves investors relying on some share price growth to get a satisfactory return, which is not guaranteed.

I’d spend my remaining £1,000 on this recovery play

FTSE 250-listed construction group Balfour Beatty (LSE: BBY) expects to claw its way back to pre-pandemic revenues this year (assuming vaccines see off the Delta variant). As the UK’s second biggest building company, this top British stock should thrive when it’s construction time again.

Balfour Beatty enjoys an average monthly net cash balance of around £600m. It is also raising funds from disposals, and plans to buy back £150m of its shares this year.

When the pandemic hit, Balfour Beatty suspended its dividend. It is now starting to repair this, and has a strong £17bn order book. New infrastructure projects include HS2, Hong Kong Airport and Oak Hill Parkway in Austin, Texas. A word of warning. A second-half recovery is priced into this stock, which could plunge if it doesn’t come through.

These top British stocks are not without risks, but all are keen to reward loyal shareholders and I’d happily invest £1,000 in each.

Best stocks to buy now

The first company on my list is the catering group Compass (LSE: CPG). Before the pandemic, this enterprise operated a relatively profitable business.

Contract catering requires little upfront investment as the facilities and equipment are usually owned by the client. This allowed the company to generate robust profit margins and a strong return on investment before the pandemic.

However, over the past 12 months, the company’s revenue has slumped. It reported a 30.4% decline in its last financial year. In addition, operating margins fell from 7% before the pandemic, to 3.4%. 

The thing is, the pandemic may have disrupted many of the company’s markets, but people are still eating. This suggests to me that as the economy recovers and reopens, Compass’s revenues should return. 

This is the primary reason why I believe Compass is one of the best shares to buy now. I think the group should return to growth over the next 12-24 months as the world gets back to normal. 

That said, it’s unlikely to be plain sailing for the FTSE 100 company over the next few months. It’s unclear if office workers will ever return in pre-pandemic numbers. It could also be sometime before large events return. Further, another coronavirus wave may set its recovery back months. 

Despite these risks, I’d buy the FTSE 100 company for my portfolio of recovery stocks today.

FTSE 100 growth

The other company I believe is one of the best shares to buy now for a recovery portfolio is InterContinental Hotels (LSE: IHG).

Just like Compass, this company has suffered significantly over the past 12 months. But the owner of hotel brands such as Holiday Inn, Crowne Plaza, and InterContinental should see a return to growth as travel and tourism activity worldwide recovers.

Indeed, the company is already reporting a pick-up in demand. According to its latest trading update, occupancy across its hotels was around 40% at the end of March.

However, management noted there was “clear evidence” that revenues would increase substantially in the months ahead, based on forward-booking trends.  

Of course, if there’s another coronavirus wave, these trends will mean nothing. Customers will cancel, and the company will return to stage one. That’s the most considerable risk the business faces right now. It could also struggle due to excess capacity in the hotel sector. 

Still, I’d buy InterContinental Hotels for my portfolio of FTSE 100 recovery shares today despite these risks and challenges. As a way to play the economic rebound, overall I think this is one of the best shares to buy now.