Shock price fall

The housing market is really starting to creak as interest rate rises accelerate. Today, Nationwide announced that house prices actually fell 0.9% month on month in October.

Last month’s drop was the first since the height of the Covid-19 crisis in summer 2020.

The London Stock Exchange’s listed housebuilders face significant turbulence in the short-to-medium term. And so do suppliers of key materials, like brickmaker Forterra (LSE: FORT).

Indeed, City analysts now expect this materials supplier to record zero earnings growth in 2023. This follows an anticipated 25% rise this year.

6.4% dividend yield

The near-term outlook is looking grimmer, then. But the long-term picture remains quite exciting in my opinion. And following recent share price falls I think Forterra shares look too cheap to miss.

Today, the brick manufacturer trades on a forward price-to-earnings (P/E) ratio of just 8.8 times. It also carries an enormous 6.2% dividend yield through to the end of 2023.

Investing for the future

Make no mistake: Britain faces a colossal shortage of homes. It reflects inadequate housing policy by successive governments. And when interest rates start to come down again (probably in the second half of 2023), demand for homes is likely to leap again.

This is why the government this week affirmed plans to build 300,000 new homes a year by the middle of this decade.

As a potential investor in Forterra I’m encouraged by the steps it’s taking to meet a possible demand boom, too. Refurbishment of its Wilnecote centre will increase capacity, boost its product range, and improve efficiency. Meanwhile its new Desford brick factory remains on schedule to be commissioned later this year.

Another top UK value share

Lookers (LSE: LOOK) is another top UK share offering brilliant all-round value this November.

The car retailer trades on a forward P/E ratio of 5.3 times. It also carries a decent 4% dividend yield for 2022, and an even-better 4.2% one for next year. And predicted dividends for the next two years are well covered by expected earnings.

Unfortunately, Lookers is expected to suffer some considerable discomfort in the near term. Earnings are expected to decline 27% and 19% in 2022 and 2023, respectively, due to supply chain issues and weak customer demand.

The EV revolution

However, given Lookers’ dirt-cheap valuation, allied with its recent ability to beat expectations, I think it’s a great value stock to buy. Just last month it hiked its full-year profit forecasts to at least £75m.

Besides, as a long-term investor I think it could be a great way to capitalise on soaring electric vehicle (EV) demand.

Britain is the second-largest market for non-petrol and diesel cars in Europe, according to Statista. And it thinks sales of EVs will soar at a compound annual growth rate of around 14.7% during the next five years. Lookers should be well placed to exploit this demand boom.

The stocks are Howden Joinery Group (LSE:HWDN) and Forterra (LSE:FORT). Each has a solid balance sheet, a price-to-earnings (P/E) ratio under 10, and a dividend yield around 4%.

Furthermore, I think that both stocks have an economic tailwind behind them. Rising interest rates are, I think, likely to help both businesses.

Rising interest rates

Interest rates in the UK have been rising sharply lately. The Bank of England base rate is now 2.25%, having been at 0.1% a year ago.

Mortgage rates have been increasing as interest rates in general rise. The average interest rate on a two-year fixed mortgage is now 6%, up from 1.2% a year ago.

Taking out a new mortgage to buy a bigger house is therefore more expensive than it was. As a result, demand for mortgages has fallen and the UK housing market has been slowing down.

I think that higher mortgage rates will lead to more people choosing to spend money improving their existing houses. In my view, this could be positive for both Howden’s and Forterra.

Howden Joinery Group

One way of improving an existing house is by installing a new kitchen. That’s where Howden Joinery Group comes in.

Howden’s supplies kitchen appliances, materials, and fixtures to the building trade. So I think that it stands to do well if there’s an increase in demand for kitchen improvements.

Compared to the cost of moving, the cost of improving a kitchen is relatively low. This is especially true while mortgage rates are high.

One of the challenges that the business has to contend with is inflation. Higher prices for raw materials are likely to increase the company’s costs.

As I see it, though, the inflationary headwind is subsiding somewhat for Howden’s. The price of lumber, steel, aluminium, and copper are all lower than they were a year ago.

That’s why I think that Howden’s can do well in the current environment. As higher interest rates in the UK might drive demand for their products, I’d happily buy the shares today.

Forterra

Another way to improve an existing house is by building an extension. This is Forterra’s line of business.

Compared to installing a new kitchen, building an extension is expensive. But for people looking for more space, it’s still likely to be cheaper than moving house.

Forterra’s main product is bricks. One of the downsides for this company is that slowing demand for houses might mean slowing demand for bricks as new building work slows down.

But I don’t think that this is a big problem. Forterra owns the London Brick Company, which the company estimates is used in around 25% of UK housing stock.

This is significant. For someone looking to build an extension, it’s important to have bricks that match the ones used in the existing structure.

As such, I expect Forterra to benefit from an increase in demand for extensions. And I’d be willing to invest £500 into the stock today as a result.

[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

NextEnergy Solar Fund  

What it does: NextEnergy Solar Fund has invested in more than 100 solar power assets spanning the UK and Italy.

By Royston Wild. Renewable energy stock NextEnergy Solar Fund (LSE: NESF) hasn’t been listed on the London Stock Exchange for a considerable period of time. 

But since its IPO in 2014 it’s shown the hallmarks of a true Dividend Aristocrat. It’s lifted shareholder payments each year since then. Last year it raised the full-year reward 2% year-on-year to 7.16p per share. 

I think it’s a great stock to buy for reliable dividend growth. Electricity is of course an essential commodity today, so demand for power sourced from NextEnergy’s assets should remain strong at all points of the economic cycle. This gives added strength for a business seeking to increase dividends over the long term. 

I think NextEnergy’s focus on green energy gives it the edge over other electricity-producers, too. This is a highly lucrative industry as the transition away from fossil fuels heats up. Though remember that it’s also one where corporate profits can suffer during cloudy weather when energy generation can slump.

Today, this renewable energy income stock carries a 6.4% forward dividend yield.  

Royston Wild does not own shares in NextEnergy Solar Fund. 

Central Asia Metals

What it does: Central Asia Metals is an AIM-listed copper, zinc and lead production and exploration company, with operations in Kazakhstan and North Macedonia

By Paul Summers. With UK inflation poised to hit a staggering 18% next year as energy prices soar (again), I’m attracted to the dividends on offer from miner Central Asia Metals (LSE: CAML). A yield of 8.2% at the time of writing won’t be enough to offset the pain ahead but it certainly isn’t to be sniffed at. What’s more, this payout looks set to be covered twice by profit according to analysts.

Naturally, nothing is a given. Metal prices are notoriously volatile, making the near-term earnings outlook distinctly foggy for any company operating in this space. Nevertheless, the likely huge demand for copper going forward as the renewable energy revolution steps up a gear could prove a boon to this AIM-listed firm.

The income stock also appears very reasonably priced compared to sector peers, at just six times earnings. 

Paul Summers has no position in Central Asia Metals

Lloyds Banking Group

What it does: Lloyds is one of the UK’s largest financial services providers and currently the largest mortgage lender in the country.

By Dylan Hood. On the whole, rising interest rates are bad news for stock markets. However, one sector that tends to be robust during these times are banks. This is because as rates rise, they can charge more on their loans to customers. Although Lloyds (LSE:LLOY) shares are down 11% year to date, I think they could be a solid buy for my portfolio.

Firstly, they have a comfortable 4.8% dividend yield. This is comfortably above the FTSE 100 average yield of 3.9%. With inflation on the rise, reaching 10.1% in July, passive income is a great shield for my portfolio. In addition to this, currently trading at 44p, Lloyds shares have a cheap looking 7.3 price to earnings ratio. This is well below competitors HSBC and NatWest who both trade on P/E ratios of just under 10.

So, with a low valuation, meaty dividend, and favourable lending outlook, I think Lloyds shares could be a great buy for my portfolio for September.

Dylan Hood does not own shares in Lloyds

St. James’s Place

What it does: St. James’s Place is a leading provider of financial planning and wealth management services in the UK.

By Edward Sheldon, CFA. My top income stock for September is St. James’s Place (LSE: STJ). It’s forecast to pay out a dividend of 55p per share for 2022, which equates to a yield of nearly 5% at present.

One reason I’m bullish on St. James’s Place right now is that the financial environment is rather complex. High inflation, rising interest rates, stock market volatility, and falling bond prices all present challenges for those looking to save and invest for their future. This should play into the wealth manager’s hands. In this environment, its advisers can add value for clients, and help them stay on track.

Another reason is that the company is raising its dividend. For the first half of 2022, the company declared a payout of 15.59p per share, up 35% year on year.

It’s worth pointing out that if global stock markets continue to fall, the company’s profits could take a hit.

With the stock currently well below its 52-week highs, however, I think a lot of this risk is already priced in.

Edward Sheldon has no position in St. James’s Place.

Greencoat UK Wind

What it does: Greencoat owns a collection of wind farms scattered across the UK, generating clean electricity to power the nation’s homes.

By Zaven Boyrazian. With gas prices sending energy bills through the roof, alternative renewable energy solutions are rising in demand. Today only around 29% of electricity generated in the UK originates from renewable energy sources. But that’s considerably higher than 5% in 2012.

This continued shift away from fossil fuels has created lucrative opportunities for companies like Greencoat UK Wind (LSE:UKW). The business owns a portfolio of on- and off-shore wind farms that generate clean electricity.

Being a wind energy business, its revenue stream and earnings can be quite lumpy. Not to mention the regulatory energy price caps eliminate any form of pricing power.

But with operating margins well above 90%, any reduction in price caps is unlikely to compromise this business, I feel. And with most of the proceeds returned to shareholders in an inflation-adjusted dividend, Greencoat looks like an excellent income stock to own in my eyes.

Zaven Boyrazian owns shares in Greencoat UK Wind

Legal & General  

What it does: Legal & General is one of the UK’s largest financial and insurance firms with a focus on four key areas. 

By Charlie Keough. My top British income stock for September is Legal & General (LSE: LGEN]. With its share price taking a hit this year, this has pushed the stock’s dividend up to an attractive yield of around 9%.  

What I also like about L&G is the long-term dividend plan it set out back in 2020. This was part of a wider five-year ambitions programme. And within this, it has targeted a cumulative dividend ambition of £5.6bn-£5.9bn by 2024. In its latest update, it highlighted it was on track to achieve this.  

The firm has also managed to grow its cash levels since last year, which gives this dividend programme a platform to build up.  

The business may see investors batten down the hatches in the months ahead. And this will likely dent revenue. 

However, with inflation continuing to rise, I think this source of passive income could prove valuable in the months and years ahead. 

Charlie Keough does not own shares in Legal & General 

Lloyds

What it does: Lloyds is one of Britain’s biggest financial institutions. Its brands include Lloyds itself, Halifax, and Bank of Scotland. It earns the bulk of its revenue from mortgage loans.

By John Choong. According to analysts, inflation is now expected to peak at 18% in January. With interest rates still lagging behind inflation, the Bank of England will have to continue raising rates. Given that Lloyds (LSE: LLOY) earns its income from the difference in the cost of borrowing and lending, I expect its earnings to continue upwards; and with that, its dividends.

Although house prices are expected to decline in the near future, I hold the view that the increase in mortgage rates should offset any decreases in property valuations. Furthermore, with an excellent balance sheet, Lloyds doesn’t need to increase its savings rate to bring in more cash, thus allowing it to increase its profits.

So, with a low price-to-earnings (P/E) ratio of 7, and a price target of £0.64, I think Lloyds shares are an excellent pick as a defensive position for my portfolio. And what’s most lucrative is its dividend yield of 4.8%, which is expected to increase along with its margins.

John Choong has positions in Lloyds.

Persimmon

What it does: Persimmon is a housebuilder focussed on the UK market.

By Christopher Ruane. Some of the yields currently on offer in the London market are hard to get my head around. Take housebuilder Persimmon (LSE: PSN) for example. Its dividend yield is almost 16%. For a FTSE 100 member, that is unusually high.

Clearly many investors doubt that the company can sustain its payout and have pushed the share price down accordingly. Although the housing market still looks fairly strong, there is undoubtedly a risk that higher interest rates and a worsening economy could push down selling prices at some point. Persimmon raised its average selling price in the first half, although volumes slipped. It continues to have a healthily profitable business model.

With its thin cover, the dividend looks vulnerable in a downturn. But even if it was halved, it would still be almost 8%. Recognising the risk, I am tempted to add this income stock to my portfolio.

Christopher Ruane does not own shares in Persimmon.

Forterra

What it does: the company manufactures building products from clay and concrete. These include bricks, blocks, and paving.

By Stephen Wright. I think that Forterra (LSE:FORT) is a really interesting income stock. At current prices, it has a dividend yield of around 4.2%.

The company makes the ubiquitous London Brick, which has been used in around 25% of the UK’s housing. This is significant because it means that Forterra’s products are likely to be used in extension projects on those buildings.

It’s natural to think that bricks are something of a commodity, but this isn’t true. Forterra has shown an ability to increase prices to its customers, which indicates that its products are differentiated from those of its competitors.

I also believe that the stock is cheap. Forterra’s share price implies a price-to-earnings (P/E) ratio of around 10 and the company has more cash than debt. This makes it look to me like a strong business at a good price.

Stephen Wright does not own shares in Forterra.

National Grid

What it does: National Grid is an energy company, operating in the UK and eastern US. It provides both electricity and gas.

By Andrew Woods. The National Grid (LSE:NG) share price has fallen just 3% in the past three months. For the year ended March, the firm paid a dividend of 50.97p per share. At current levels, this constitutes a dividend yield of 4.49%. As such, it’s my income stock for September.

The company reported a 107% rise in pre-tax profit, totalling £3.4bn, for the 12 months to March. Furthermore, its dividend payment was 3.7% greater than in 2021. Much of this was down to higher electricity transmission as energy costs spiralled following the pandemic and the war in Ukraine.

One concern, however, is that profit margins may be tighter in the coming months. This could be due to the higher cost of securing energy sources, like natural gas.

Despite this, the business has operating cash flow of £5.3bn, and this may allow the company to engage in controlled expansion of its operations within the UK and abroad.

Andrew Woods has no position in National Grid.

Vodafone

What it does: Vodafone is a leading European mobile and broadband operator. In Africa, it runs mobile and payment services.

By Roland Head. My top dividend share pick is Vodafone Group (LSE: VOD). This well-known telecoms operator offers a 6.5% dividend yield and an improving outlook.

Vodafone’s latest trading update showed growth in Europe and continued expansion in Africa, where the company now has 186m mobile customers.

Currently, fewer than half of Vodafone’s African customers use mobile data or the group’s M-Pesa mobile money service. However, I expect the number of people using these higher-value services to continue rising, supporting long-term growth.

The main challenge the company faces in Europe is strong competition in mature markets. This has caused growth to slow in recent years.

However, changes are underway to increase network utilisation. Cost savings should also come as Vodafone gradually switches off its 3G services.

In the meantime, profit margins are improving, and cash generation remains good. This should support the dividend. I see Vodafone as a dividend buy in September.

Roland Head does not own shares in Vodafone.

A retail star

A series of strong trading updates has helped the Pets at Home (LSE: PETS) share price more than double during the past 12 months. I’m expecting another sunny batch of sales numbers when first-quarter results are unpackaged on Thursday, 29 July.

This UK retail share has been boosted by a boom in pet ownership rates due to Covid-19. But the strong results of the last fiscal year are no anomaly. Pets at Home has been performing strongly for a long time now, thanks to the increasing amounts people now spend on their furry companions. On a two-year basis, like-for-like sales at the business are up 17%.

Pets at Home sells all manner of pet-related products and provides veterinary care and grooming services too. This puts it in the box seat to exploit the fast-growing animalcare market, in my opinion. Though intense competition from supermarkets and the likes of Amazon could, of course, throw a spanner in the works.

Home comforts

As an owner of Ibstock shares, I’ll be closely watching industry rival Forterra’s (LSE: FORT) next investor update, also on 29 July. Last time the brickbuilder updated it said that business had been “better than expected” during the first four months of 2021.

It’s likely Forterra will advise that input costs have continued rising recently. But recent data on home starts suggests to me that this UK share will report product sales have kept soaring too. The number of newbuilds erected in the first quarter of 2021 clocked in at their highest for 20 years.

I don’t expect demand for new homes to cool either. Despite the upcoming end to the stamp duty holiday, other government support like Help to Buy, along with rock-bottom interest rates and intense competition among mortgage lenders should keep supporting first-time buyer activity, in my opinion. And so Forterra’s bricks should keep selling rapidly.

Another great UK share to buy

Speaking of housebuilding, I’d also snap up Springfield Properties (LSE: SPR) following the release of terrific financials earlier this month. This particular UK share said it enjoyed “significant growth in revenue in private and affordable housing” during the 12 months to May, with revenues soaring a shade below 50% year-on-year.

Springfield builds properties in Scotland, which is also suffering from significant housing shortages that’s sending prices ever higher. In fact, this particular UK housebuilding share could potentially enjoy more upside on this front than its England-focussed rivals. As analysts at Progressive Equity Research note, property price rises north of the border “have lagged most of the UK.”

I think this a great buy despite the risk that an economic downturn could damage sales.

I still plan to keep buying British stocks for my Stocks and Shares ISA in March though. I think there are plenty of top-quality stocks that should deliver good returns, despite the threat posed by Covid-19. Here are a couple I’d buy in the coming days.

#1: The FTSE 100 gambling goliath

I think Flutter Entertainment (LSE: FLTR) could be a wise UK share to buy before full-year results come out on Tuesday, March 2. The online gambling industry has been expanding at breakneck pace in recent years. And the sector has had a significant shot in the arm from Covid-19 as gamblers have been stopped from taking a trip to the bookies.

Flutter Entertainment’s last trading update certainly impressed me. Then it said that trading across both its sports and gaming divisions had performed better than expected in the third quarter. That followed a prediction-beating performance in the six months to June. I’m expecting trade at the FTSE 100 firm to remain strong too, underpinned by the popularity of its brands like Pokerstars and Paddy Power and its aggressive expansion into the US.

It might not all be plain sailing for Flutter Entertainment though. Recent action by the UK Gambling Commission reminds us of the constant threat that regulators pose. As the boffins at Hargreaves Lansdown note, “the spectre of greater regulation in the UK is hanging over the sector… affordability checks for customers who lose £100 or more a month [is] one option on the table.”

#2: Another forecast-beating UK share

I believe Forterra (LSE: FORT) might be another top British stock to buy in early March. This small-cap also has shown a habit of beating expectations in recent months. For this reason — and also partly because I already own fellow brickmaker Ibstock in my ISA — I’m excited to see what its full-year results will show on Tuesday, March 9.

Back in January Forterra bumped up its full-year guidance again as strong trading conditions beginning in early autumn continued into November and December. Demand for the UK share’s building products suffered earlier in 2020 as Covid-19 caused construction sites to shut down. But the recovery since lockdowns were eased illustrates how strong underlying demand for bricks are. I expect sales of Forterra’s products to remain strong, too, as building rates ratchet up to combat Britain’s housing crunch.

I think Forterra is a very-attractive buy right now. But it still faces significant risks in the short-to-medium term. As it mentioned last month, changes to the Help to Buy purchase incentive scheme might damage homebuyer demand going forwards and by extension sales of its bricks. The planned termination of the Stamp Duty holiday next month could dent the housing market as well. Even if it’s extended for a few months as rumoured, it will eventually end, so a reckoning for the sector could still come this year.

#1: A bright UK e-retailing share

I think the booming e-commerce sector makes ASOS (LSE: ASC) one of the best UK shares to buy today. This particular fashion retailer offers a broad range of products and brands across many price points. And it trades across Europe and the US, giving it terrific strength through diversification. What’s more, by focusing on the 20-somethings demographic, it’s centred its operations on the most lucrative group in terms of fashion spending.

Now ASOS’s shares don’t come cheap. City analysts reckon the company’s earnings will rise 13% this fiscal year (to August 2021). This leaves it trading on a high forward price-to-earnings (P/E) ratio of 40 times. Such a vertiginous valuation leaves the stock in danger of a share price correction if trading begins to disappoint.

#2: A brickmaking beauty

British house prices continue soaring at a stratospheric pace as demand keeps on exceeding supply. This means housebuilding needs to pick up significantly in the years ahead. And this bodes well for UK brickmaking shares like Forterra (LSE: FORT).

The government has stepped up attempts to improve construction rates in recent years and homebuilding on these shores hit 33-year highs last year. It’s likely an overhaul of the planning system will help construction activity during the 2020s too.

City forecasts expect annual earnings at Forterra to soar 130% in 2021. Consequently, it trades on a forward price-to-earnings growth (PEG) ratio of 0.2. This sub-1 reading suggests the brick manufacturer could be wildly undervalued today.

Bear in mind though that estimates can miss to the downside as well as the upside. And this can pull share prices lower. Investors like me need to remember too that a bumpy economic recovery could damage demand for Forterra’s products in the short-to-medium term.

#3: A streaming great broadcaster

I also like the look of STV Group (LSE: STVG) right now. This is despite the broadcaster facing significant threats from the likes of Netflix and other major streaming companies, which I have to take into account when considering investing in this stock. The business has pumped huge amounts of money and plenty of effort into developing its own video-on-demand (VOD) capabilities. And this is paying off handsomely. Indeed, streaming via its STV Player platform soared 68% in 2020, faster than any other broadcaster’s VOD service. And the platform’s 12.5m streams in January was up 115% from the same month last year.

City analysts currently think STV’s annual earnings will rise 12% in 2021. As a result, the UK share trades on a forward PEG ratio of 0.9. I think this low valuation, coupled with a bulky 4% dividend yield, makes the broadcaster an attractive stock to buy today.

These companies continue to face significant risks. For example, a second wave of coronavirus could cause another market slump. 

Nevertheless, over the long run, these shares could offer improving total returns. With that in mind, here are two FTSE 250 stocks that may have the potential to double investors’ cash over the next few years when owned as part of a portfolio.

FTSE 250 stocks on offer

Lockdown measures introduced over recent months have had a significant impact on the financial performance of FTSE 250 outsourcing group Capita (LSE: CPI). 

In its latest trading update, the company pulled its earnings projections for the year citing the coronavirus outbreak. 

However, the company isn’t as exposed as many other businesses. Around 50% of revenues come from the UK government, for which Capita runs a range of essential services. The group has also been winning new contracts over the past few months.  

Management has taken salary cuts and staff have been furloughed to help cushion the impact of the outbreak on the firm’s bottom line. The FTSE 250 group expects these efforts will be enough to help see Capita through the crisis. 

As such, Capita seems well-placed to navigate the crisis and could come out stronger on the other side. Indeed, before coronavirus, it was making encouraging progress in delivering on its new strategy. 

The group’s reputation, size and diverse range of services mean it may offer long-term recovery potential after its 73% share price decline since the start of the year.

Forterra

Another FTSE 250 company that could help double investors’ money is Forterra (LSE: FORT).

A leading UK producer of manufactured masonry products, Forterra’s sales took a big it when the UK went into lockdown at the end of March. But, it has staged a rapid recovery as the economy has started to open up again. 

Its latest trading update reported that sales had recovered to 50% of corresponding 2019 levels in May. In April, sales had fallen a staggering 90% year-on-year. For the full-year, management is projecting a decline in sales of around 20%. 

Despite this, the overall share price performance of Forterra has been relatively underwhelming over the past two months. The FTSE 250 stock is only trading slightly above the level it was when the UK went into lockdown at the end of March. 

Therefore, now could be an excellent time to snap up a share in the business as its recovery takes shape. Even though the company is forecasting a decline in sales of only 20% for 2020, the stock has fallen 50% since mid-February.

This suggests the shares offer a margin of safety after recent declines and could help investors double their money when owned alongside other undervalued FTSE 250 stocks like Capita. 

Gold miner Petropavlovsk is one share that trades around these rock-bottom levels. Its share price has rocketed 30% over the past three months yet it still trades on a forward earnings multiple of 6.5 times. It’s a reading that provides scope for more meaty price gains given the bright outlook for bullion prices.

It hit a fresh seven-year peak above $1,760 per ounce just last week. It looks set for additional advances as Covid-19 news flow keeps investors nervous and US-Chinese relations sour too. Over a longer time horizon, it looks like a landscape of low, low interest rates should keep safe-haven gold well bought as well. Buying shares in Petropavlovsk is one great way to ride this theme.

Another ISA contender

Huge question marks hang over the health of the housing market in the near term. With the economy expected to go for a bath this is no surprise, in turn smacking the purchasing power and the confidence of potential homebuyers. Many mortgage lenders have also started asking for higher deposits from buyers as they hunker down.

This doesn’t affect the long-term profits outlook for brick manufacturer Forterra (LSE: FORT) though. Britain’s homes shortage is well established and requires drastic action to solve. It’s why the government plans to build 300,000 new homes each year. People still need a place to live, of course. And once the economy begins to eventually improve, it will release plenty of pent-up first-time-buyer demand, encouraging builders to ratchet up their production plans again.

At current prices, Forterra changes hands on a P/E ratio of just 9.7 times for 2020. This, in my opinion, makes it a top value buy for ISA investors.

Toe the line

I reckon Direct Line Insurance Group (LSE: DLG) is another great buy for bargain-loving ISA investors. It trades on a prospective P/E multiple bang on the value watermark of 10 times.

Insurance companies are traditionally considered to be brilliant safe havens, sure. But this particular FTSE 250 share hasn’t had everything its own way. It will take a £44m hit due to the Covid-19 crisis supercharging claims at its Travel division. It will also incur £70m of costs by giving cash-strapped customers assistance and delaying redundancies.

Things are not all bad, however. Claims at its core Motor unit had sunk by 70% in April because of lockdown measures. The likelihood that some form of quarantine will remain in place until well into the summer means that low-than-usual claims costs can be expected for some time too. And many analysts expect that this will more than wipe out the extra costs it’s incurring.

But don’t just buy Direct Line on account of its likely resilience in these tough economic times. The rate at which its own-brand policies are growing makes it an exciting ISA buy for the years ahead, too I’d happily buy it for my own stocks portfolio.

By buying these today and tucking them away in a Stocks and Shares ISA, you could enjoy big tax-free gains when the market recovers.

This FTSE 250 share is motoring on

One stock I’m keen on in the current climate is Direct Line Insurance Group (LSE: DLG). The group’s main product is motor insurance, but it also sells home and travel insurance.

This business hasn’t been affected too badly by the coronavirus pandemic. Although management expect to pay out an extra £25m in travel claims as a result of the virus, motor insurance claims fell by 70% in April.

Direct Line has cancelled its dividend to preserve cash. This has left the group with a strong balance sheet and provided funding for measures such as partial customer refunds and free breakdown recovery for NHS workers. The company has also kept all staff on full pay and guaranteed all jobs until the autumn.

The Direct Line share price has fallen by more than 15% so far this year. In my view this FTSE 250 share now offers excellent value for long-term investors, trading on about 10x forecast earnings. When dividend payments restart, I’d expect a yield of about 6% from current levels.

Bricks and mortar

Most housebuilders are now restarting construction and some have reopened their sales offices. I’m not sure about the outlook for house prices, but I think FTSE 250 brickmaker Forterra (LSE: FORT) should be relatively safe.

Forterra has a portfolio of popular brick and block brands, including London Brick (Fletton), Red Bank, Thermalite and FormPave. The firm enjoys a good share of the market for new-build homes and repair and maintenance work.

Production of pre-formed concrete has continued throughout the lockdown and one brickmaking kiln was relit at the end of April. Further plants are expected to reopen in May.

Although the outlook is unclear, Forterra went into the crisis with low levels of debt and good profitability — the company generated a return on capital employed of almost 25% in 2019. At around 200p, the shares are nearly back to their 2016 IPO level. I think this FTSE 250 share could perform well from here.

Look abroad to diversify

One stock I own that’s performing well right now is commercial property group Sirius Real Estate (LSE: SRE). This FTSE 250-listed firm owns office and industrial parks in Germany.

Although some UK landlords are suffering badly in this crisis, Sirius’s property mix and German focus appear to be delivering better results.

In an update last week, the company said that in April it collected 98.8% of normal rent and service charge payments. New lettings continued through March and April, and enquiries from prospective tenants are said to be at “normal levels”.

Sirius shares are up by more than 50% from the 44p low seen in March. But the shares remain well below pre-crisis levels of around 90p and I think further gains are possible. The dividend has been maintained at normal levels and the shares currently yield around 4.9%. I remain a buyer of this FTSE 250 stock.

Forterra (LSE: FORT) is another share that’s looking good to ride this favourable trading environment. The FTSE 250 brickbuilder was positive-but-restrained in its most recent market update in January. Then it advised that “the challenging market conditions experienced in the second half of 2019 [should] gradually improve.” But it added: “The group’s performance in the first half of 2020 will be below that achieved in the first half of 2019.”

It’s quite possible that, given the bounce to the housing market since the start of the year, Forterra will be a little more upbeat when full-year trading results are unpacked on Tuesday, 10 March. And this could provide its share price with renewed strength.

A bright outlook

City analysts expect the business to record a 4% earnings decline in 2019. However, they reckon Forterra will bounce back with a modest 2% rise this year. An improved 5% increase is forecasted for 2021 as well.

Not only does a robust marketplace, underpinned by a chronic homes shortage and inadequate British brick supplies, look set to support Forterra over the medium-to-long term. The Northamptonshire company can look forward to its new Desford factory coming online too, a move that’ll supercharge brick production in the years ahead.

The production line is set to start rolling at its state-of-the-art facility in 2022, becoming Europe’s largest with an annual capacity of 180m bricks. The move will drive group production capacity around 16% higher and allow the company to capitalise on rising homebuilder activity in the new decade. The government seeks to create 300,000 new homes by the middle of the 2020s.

In my book, Forterra’s low forward P/E ratio of 13.7 times fails to reflect these bright growth prospects.

Above-average dividend yields

Forterra might not be the most exciting income stock and certainly doesn’t offer the biggest dividends yields. Still, yields over the next couple of years outstrip the UK mid-cap average of 3%. For 2020, the reading sits at 3.3% and, for 2021, a yield of 3.5% can be expected.

What makes the business such an appealing income share to me is the likelihood of stronger and sustained dividend growth. Forterra boasts the sort of tremendous cash generation that allows it to light a fire under shareholder rewards.

Cash from operations leapt 15% year-on-year in the first half of 2019, to £27.6m. This helped the amount of net debt on its books to plummet, to £34.5m from £51.9m. And, as a result, Forterra raised the interim dividend by more than a fifth (21.2% to be exact).