That’s hardly surprising, given what’s been happening in the stock market lately.

• High inflation is driving up costs causing consumer spending to drop.
• Rising interest rates are making access to external capital more expensive.
• Supply chain disruptions are causing global manufacturing delays.
• Labour shortages are hurting profit margins.
• Volatility in currency exchange rates is damaging earnings.

With all of these problems happening simultaneously, it’s no wonder the FTSE 100 index has been tumbling. However, it’s important to remember that these issues are ultimately short-term in nature. And there are some early indicators that the current situation is slowly improving.

In other words, the index may be primed for a comeback in the coming months. As such, the window of opportunity to capitalise on low stock prices may already be closing. With that in mind, here are two leading shares that I believe are primed for an impressive long-term recovery before reaching new heights.

Footsie’s top generics pharma giant

Hikma Pharmaceuticals (LSE:HIK) has had a pretty rough year, with its shares basically being slashed in half. Part of this adverse movement is likely just general stock market volatility. But another reason why investors seem to be bearish is the state of its Generics division in the US.

Following increased competition, this part of the company has been underperforming. Fortunately, its Injectables and Branded segments continue to steal the show. And that’s pretty encouraging, given this is where management’s long-term strategy is focused.

The Generics division is responsible for around a third of sales, so seeing a double-digit slowdown is concerning. However, the group is launching a series of new products that are expected to turn things around in the coming months.

Assuming this is successful and its other segments continue to outperform, then this business could be trading at quite an attractive discount today. Of course, there’s no guarantee. And the share price may tumble further if the group fails to meet expectations.

With all that said, I believe the risk is worth the reward for my portfolio. Hikma has a solid track record of successful product launches, and given the continued double-digit growth in its other divisions, the collapse in share price makes this business look like a bargain buy if I had capital at hand to invest today.

Return to darling status?

For years Melrose Industries (LSE:MRO) was considered a top-tier engineering business. As a reminder, the group acquires struggling enterprises and attempts to turn them around before selling them later for a higher price.

Unfortunately, engineering was one of several industries to be absolutely decimated by the pandemic. And even today, the FTSE 100 firm continues to endure disruptions that have decreased its share price by another 37% in the last 12 months.

But following some swift business restructuring, Melrose appears to be on the mend. Profitability is still a shadow of its former self but is significantly higher than in 2020.

Management has taken on debt to fuel its recovery, which does add additional risk, especially with interest rates on the rise. Yet in my opinion, the worst has already passed for the company. And assuming no more spanners get thrown into the works, I believe Melrose remains an excellent stock to have in my portfolio.

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

Residential Secure Income REIT 

What it does: Residential Secure Income REIT invests in residential rental properties and shared ownership homes.

By Royston Wild. The economic outlook remains extremely uncertain right now. It’s why I think buying classic defensive stocks, like residential property rentals business Residential Secure Income REIT (LSE: RESI), is still an attractive idea. 

But don’t think of this UK share as simply a reliable share to own in difficult times. A widening supply and demand imbalance means that rental income at the real estate investment trust (REIT) looks set to soar. 

This explains why City analysts expect earnings to rise 20% this fiscal year (to September 2022). They predict an 8% bottom-line increase for next year, too. 

Data from Hamptons shows that rent growth in the UK remains super strong despite deteriorating economic conditions. Average rents rose 8.3% year on year in August. Last month’s increase was also the sixth largest yearly increase over the past decade. 

Rising interest rates pose a threat to Residential Secure Income’s shared ownership operations. However, I believe the prospect of a long-running shortage of rental homes still makes these shares a top buy for investors. 

Royston Wild does not own shares in Residential Secure Income REIT. 

Scottish Mortgage Investment Trust 

What it does: SMT is an investment manager primarily trading consumer, healthcare and technology stocks.

By Hamish Cassidy. The Scottish Mortgage share price has had a rough year so far, falling 32% since January. However, the stock has been steadily rising since June, and I think it’s set to climb higher this September. 

The company’s FY22 results reported £12.5bn in total assets. Exposure to the tech sector increased, now accounting for 25% of SMT’s portfolio. With tech giants such as Tesla and Nvidia gaining strong momentum last month, I think September looks hopeful.

Consumer spending has dropped due to the cost-of-living crisis. SMT has felt the effects of this, given that consumer discretionary stocks hold the majority of its portfolio at 33.5%. However, a strong turnaround in cash inflows from financing (increasing £1.2bn) suggests SMT can excel through the remainder of this year. 

I think the fund is very cheap at 880p. The stock looks like a great long-term addition to my September portfolio.

Hamish Cassidy owns shares in Scottish Mortgage Investment Trust.

Imperial Brands

What it does: Imperial Brands is a consumer goods company selling a range of cigarettes, fine cut and smokeless tobaccos and papers

By Paul Summers: Imperial Brands (LSE:IMB) has had a stellar year relative to most UK stocks. Not that this is all that surprising. Thanks to the addictive nature of what it sells, it was only a matter of time before even growth-focused investors saw it as a great option for parking their cash while the economic clouds pass.

I wonder if there could be more gains ahead. After all, the shares still look cheap at seven times forecast earnings. A 7.4% dividend yield is also enticing considering just how high inflation is expected to rise over the next few months.

There’s clearly still risk here. Cigarette volumes are in decline and regulators are never far away. We could also see some profit taking at some point. 

So long as I spread my cash around other sectors, however, I reckon Imperial will remain one of the best defensive shares around to buy.

Paul Summers has no position in Imperial Brands.

Diploma

What it does: Diploma is a distributor of industrial parts specialising in seals, controls, and healthcare equipment.

By Stephen Wright. In my view, Diploma (LSE:DPML) is one of the best UK stocks to buy at any time. The underlying business generates strong returns and has a significant advantage over its competitors.

One of the things I love about Diploma is the fact that it doesn’t have factories and expensive plants to maintain. This is because it distributes industrial components, rather than manufacturing them.

As a result, the business generates significant amounts of cash. 92% of the cash the business brings in becomes free cash available to the company.

This is an attractive business, but it can’t be easily emulated. Diploma’s scale and the size of its inventory give it an advantage over the competition.

Its customers know that Diploma can likely get parts to them quickly and more efficiently than anyone else. That’s what sets the business apart and means that its cash flows are — in my view — likely to prove durable.

Stephen Wright does not own shares in Diploma.

BT

What it does: BT is a UK-based multinational telecoms company operating in over 180 countries.

By Dylan Hood. Rising inflation and interest rates have weighed down on stock market valuations. BT (LSE:BT-A) shares have fallen 9% year to date, and over 20% in the past six months because of this. However, when I look at BT’s underlying business, not much has changed.

The group reported a small drop in profits in its Q1 FY23 results, however, in my opinion investors overreacted to this news. The firm is still on track with its Openreach roll out, which is now in over 7m homes, and its 5G network now covers over half the UK. In addition to this, the stock trades at a much lower price-to-earnings ratio (12 compared to 20) than its biggest competitor, Vodafone. BT’s asset-rich nature also means that it can act as a hedge against inflation.

Considering all of these factors, I think that BT shares looks like they could be a solid buy for my portfolio in September.

Dylan Hood does not own shares in BT

InterContinental Hotels Group

What it does: IHG is a hospitality company that owns a number of hotel brands including InterContinental, Holiday Inn, and Kimpton.

By Edward Sheldon, CFA. There are two main reasons I’ve chosen InterContinental Hotels Group (LSE: IHG) — a travel stock — as my top pick this month.

The first is that right now, we’re seeing a massive shift in the way consumers spend their money. Instead of buying goods, like they did during the pandemic, consumers are now spending their money on services. And the travel industry is benefitting. This is illustrated by IHG’s recent H1 results. For the six months to 30 June, revenue was up 53% year on year.

The second is that the company has pricing power due to its strong brands. The ability to raise prices should help it offset inflation.

The big risk to my investment thesis is that consumer spending slows down significantly due to the cost-of-living crisis. This could have a negative impact on sales.

However, with the shares trading at just 18 times next year’s earnings forecast, I think the risk/reward proposition here to buy into is quite attractive at present.

Edward Sheldon has no position in InterContinental Hotels Group.

Hikma Pharmaceuticals

What it does: Hikma Pharmaceuticals focuses on manufacturing and selling generic, branded, injectable, and in-licensed medicines.

By Zaven Boyrazian. Hikma Pharmaceuticals (LSE:HIK) is a world-leading generics pharmaceutical business. The firm focuses on recreating existing drugs and treatments that have come off-patent to improve availability and affordability for patients.

Lately, the stock has taken a bit of beating on fears of rising competition in the United States, causing profitability to suffer. In fact, over the last 12 months, the share price has fallen by almost 50%.

However, management is in the process of ramping up investments into its high-margin injectables business. And with its branded products continuing to deliver double-digit profit growth offsetting the recent losses, I feel investors may have overreacted.

Demand for healthcare isn’t likely to disappear any time soon. Even during a recession, when consumer spending is dropping, access to medicine is still a top priority for most patients. Therefore, I feel the recent drop in the share price presents my portfolio with a lucrative buying opportunity this month.

Zaven Boyrazian does not own shares in Hikma Pharmaceuticals.

Lloyds Banking Group

What it does: Lloyds is a FTSE 100 banking group and one of the UK’s largest mortgage lenders. 

By Charlie Keough. My top British stock for September is Lloyds (LSE: LLOY). The stock has been pushed down this year as inflationary pressures have weighed on investor sentiment. And trading for below 50p, I see real value in the Lloyds share price.  

Firstly, a hike in interest rates will benefit the business. With the Bank of England recently setting rates at 1.75%, the firm will be able to charge customers more when borrowing. With the Bank looking like they could hike rates further, this is good news for Lloyds. 

On top of this, the stock also offers a higher-than-average dividend yield when compared to the FTSE 100. 

Lloyds could suffer from a slowdown in the housing market. After surging in recent times, the market has hit the brakes. As a mortgage lender, this could spell trouble. 

However, the business has made moves to diversify such as through its rental venture, Citra Living. And with a strong dividend and long-term outlook, I’d buy some shares today.  

Charlie Keough does not own shares in Lloyds.

Persimmon

What it does: Persimmon is engaged in the homebuilding business. It operates under three different brands across the entire United Kingdom.

By Andrew Woods. The shares in Persimmon (LSE:PSN) have been volatile of late, down 31% in the last three months.

In a report for the six months to 30 June, the firm reiterated that it was targeting completions between 14,500 and 15,000 for 2022. In addition, it stated that there was still strong demand for houses, reporting a forward-sales rate of 90%.

However, first-half revenue and underlying operating profit declined by 8.2% and 8.8%, respectively.

There’s also the issue of rising interest rates. This is currently set at 1.75% in the UK and may climb higher. What this potentially means is that it becomes more expensive for customers to take out mortgages. This may lead to a slowdown in the housing market and that could be bad news for Persimmon.

Nevertheless, the company has total cash of £660m and debt of just £8.3m. This gives me hope that it could easily weather any storm that comes its way in the short term.

Andrew Woods has no position in Persimmon.

ITV

What it does: ITV makes and distributes content across television and digital platforms, as well as providing facilities for third party content creators.

By Christopher Ruane. I thought the interim results released by ITV (LSE: ITV) in July made for good reading. Total revenue grew 16% compared to the same period the prior year, while external revenue was up 8% and statutory earnings per share doubled. The company affirmed its commitment to an annual dividend of at least 5p per share, which means the prospective dividend yield is now around 7.8%.

Despite that, the ITV share price has continued to drift. It now sits 45% below where it was a year ago.

Long-term structural decline in television audiences remains a threat to both revenues and profits at the business. However, ITV is in growth mode and the digital world offers lots of room for expansion. It continues to generate substantial free cash flows and I expect that to continue in coming years. I would happily buy more ITV shares to my portfolio in September.

Christopher Ruane owns shares in ITV.

Unilever

What it does: Unilever is a fast-moving consumer goods conglomerate that produces beauty products, personal care, foods, and cleaning agents. Its brands include Lynx, Ben & Jerry’s, Dove, and many more.

By John Choong. Consumers are always going to need household products, even when prices are at an all-time high. This is why I think Unilever (LSE: ULVR) is a healthy choice for my portfolio. The demand inelasticity surrounding the majority of its products means that sales figures are unlikely to get hit too badly.

This was reflected in its most recent earnings report where CEO Alan Jope revised the company’s earnings guidance upwards. The FTSE 100 giant now expects underlying sales growth for 2022 to top 6.5%, which is excellent news given the decline in retail sales data. Additionally, the conglomerate’s geographical diversity should protect its top line from declining British and European sales figures.

Therefore, Unilever shares would serve my portfolio as a defensive play as the UK enters into a recession. Its price target of £40.81 doesn’t provide much of an upside. However, it brings me a little bit more security knowing that the likelihood of my money declining by double-digit percentages is low.

John Choong has no position in Unilever

According to Ben Laidler, Global Markets Strategist at eToro, “the biggest casualty is likely to be asset manager Abrdn“. Shares in this FTSE 100 firm have fallen by more than 40% over the last year.

If Abrdn is demoted to the FTSE 250, its 9.5% dividend yield could make it one of the highest-yielding shares in the mid-cap index. However, Abrdn’s payout isn’t covered by forecast earnings and I’m unsure how safe it might be.

Abrdn isn’t on my radar as a potential buy today. But I am interested in two of the other FTSE stocks flagged up by Laidler.

He thinks “other potential casualties are generic drug maker Hikma Pharmaceuticals (LSE: HIK) and kitchen-maker Howden Joinery Group (LSE: HWDN)“.

I’ve followed both companies for years and have a good opinion of them. Although they’ve often looked expensive to me, both stocks have fallen by around 35% so far this year. I think Hikma and Howden could be good long-term buys.

Hikma: temporary setback?

Hikma’s share price has now fallen by more than 50% since last summer. Much of this slump has been caused by problems in the group’s generics division. This produces cheaper alternatives to branded medicines whose patent protections have expired.

Generic sales this year have been hit by new product delays and tougher competition in key US markets. As a result, Hikma cut its profit guidance earlier this year. The group’s CEO resigned soon after.

However, Hikma’s injectables and branded medicine divisions are still performing well. At a group level, Hikma is expected to report flat sales and only a small decline in profit in 2022. Operating margins are expected to remain above 20%.

Hikma is currently being managed by executive chairman Said Darwazah. He’s a member of the company’s founding family, which owns 27% of its stock. I think Darwazah will be motivated to deliver a turnaround.

In the meantime, Hikma shares are trading on just eight times forecast earnings, with a 3.4% yield. I think that’s probably too cheap.

Howden: director share-buying

It looks to me like Howden Joinery may avoid being demoted and keep its place in the FTSE 100. But whatever the outcome, I think this successful growth business is starting to look like an attractive investment.

Howden’s business is built on offering an excellent service and supplying trade customers only. The company’s local branch managers are given plenty of freedom to build direct relationships with customers, in exchange for hitting commercial targets.

With the shares down by around 35% from last year’s record highs, Howden is now trading on around 11 times forecast earnings, with a useful 3.4% dividend yield.

Finance boss Paul Hayes already seems to have been tempted by the reduced share price. He’s spent more than £100,000 buying shares so far this year, including a £48k purchase earlier in August.

The big risk is that sales could slump next year if the UK suffers a full-blown recession. However, there’s no sign of problems yet and the share price already reflects a more cautious outlook. I think the shares could be a good buy in September.

With that in mind, let’s look at what I think are the best dividend shares to buy now.

The best home improvement dividend shares?

With the housing market expected to suffer a slowdown in 2023, investing in home improvement may seem like an odd choice. But this may not be as disastrous as it looks on the surface. The average house age in the UK hit 32 years at the end of 2021. And with properties getting older, the demand for renovations and repairs is rising.

That’s excellent news for Howden Joinery Group (LSE:HWDN). The FTSE 100 firm is a leading expert in designing fitted kitchens, along with other house renovation offers, working directly with tradesmen through its network of 750+ depots.

It’s not the fastest-growing enterprise out there. But revenue has been growing at a double-digit rate these past five years. And with profit margins expanding as management improves its operational infrastructure, earnings are growing even faster.

All this points to reliable dividend shares in my experience. And while the yield is only 3.14%, management’s buyback programme has reduced the number of shares outstanding by around 1% a year. That brings the effective yield to a more impressive 4.14%.

While the business generates most of its income from home renovation, new-builds do contribute to the bottom line. And a housing slowdown could therefore have a tangible impact on earnings if homebuilders wind down construction efforts.

Nevertheless, as a long-term investor, this business seems like a fine addition to my income portfolio, even with this risk.

A flagship FTSE 100 pharmaceutical firm

Another industry I feel isn’t likely to disappear anytime soon is healthcare – specifically pharmaceuticals. Researching and developing new drugs to bring to market isn’t exactly easy, nor is it cheap. Fortunately, that’s less of a problem for Hikma Pharmaceuticals (LSE:HIK).

The group is a world-leading generics business. That means instead of focusing primarily on developing new treatments, it recreates drugs that have come off patent to improve both availability and affordability for patients.

Lately, these dividend shares haven’t been the best performers, with the stock price tumbling 44% over the last 12 months as competition in the US heats up. While that’s a bit of a concerning sign, investments into its injectables and branded divisions seem to be paying off in terms of growth. This is expected to accelerate following its latest acquisitions.

To me, this looks like a buying opportunity for my portfolio, despite the competitive challenges. Today, the dividend yield stands at 3.26%. But paired with its ongoing share buyback programme, that yield rises closer to 4.1%.

The pandemic triggered a surge in fresh funding from governments and investors alike. And with this capital being allocated across a broad spectrum of research projects, the quality and quantity of healthcare products are forecast to rise rapidly. As a result, analysts predict the market opportunity for healthcare stocks will grow annually by double-digits over the next decade.

This obviously presents a potentially lucrative opportunity for investors. So, let’s explore the risks and rewards of investing in healthcare shares a bit further. 

What are healthcare stocks?

Healthcare stocks lie at the heart of the medical industry. And as the name suggests, these businesses are focused on maximising the quality of patient care to let people live longer and healthier.

Typically, healthcare shares can be organised into one of four categories:

• Healthcare providers – These firms are on the front line, delivering healthcare to patients first-hand. Such businesses include hospitals, physician practises, nursing facilities, and more recently, telehealth providers.
• Drug developers – Companies engaged in researching and developing new treatments and medicines to tackle diseases, infections, mutations, and disorders.
• Medical device designers – Groups designing and manufacturing devices to improve the quality of patient care. This can range from something as simple as a stethoscope to as complex as surgical robots.
• Payers – While less common in the UK, this segment includes all the businesses involved in helping cover medical costs like health insurance providers and pharmacy benefit managers.

This is by far one of the largest and most complicated industries to operate in. Due to the high degree of importance and expertise needed when handling patients’ lives, regulations are extremely strict. And, in some cases, create prohibitively expensive barriers to entry.

For example, both drug developers and medical device designers need to receive regulatory approval in each country where they wish to offer their products. 

Industry challenges

Here in the UK, that regulatory body is the Medicines & Healthcare Regulatory Agency (MHRA). In the US, it’s the Food & Drug Administration (FDA). And since every regulator has different standards and requirements, the price of checking off all the boxes gets expensive very quickly.

An approval prerequisite for drug developers requires clinical trials that can take over a decade to complete. Medical device designers need to demonstrate the safety and efficiency of their products with field data that’s expensive to gather.

Healthcare providers have to undergo similar approval processes, and payers are subject to significant financial oversight.

To put it simply, life is not easy for healthcare stocks. But for those that can overcome these regulatory hurdles without going bankrupt, an enormous market opportunity lies ahead. According to a 2020 report by the World Health Organisation, $8.3trn is spent annually on healthcare. That’s 10% of global GDP! And it’s still rising.

Therefore, it’s not surprising that some of the best-performing shares over the years operate within the healthcare sector. With that in mind, let’s explore the top five healthcare providers on the London Stock Exchange in order of market capitalisation.

[KevelPitch adtype=4578]

Top healthcare shares in the UK

AstraZeneca

AstraZeneca is one of the largest pharmaceutical companies and healthcare stocks in the world. Given its access to vast resources, the group develops new treatments for a wide range of diseases. The list includes cancer, cardiovascular, renal respiratory diseases, and immunology and other rarer conditions. 

It already has a diverse portfolio of products on the market and, more recently, is known for its Covid vaccine. Looking at the current project pipeline, AstraZeneca has 183 drug candidates being researched, with 16 in late-stage development and two under regulatory review.

Key Metrics:

• Market cap: £157.2bn
• Average daily volume: 2.39m 
• HQ: Cambridge, UK
• Cash/debt: $6,398m/$30,781m

GlaxoSmithKline

GlaxoSmithKline is a global leader in vaccines and pharmaceutical treatments targeted at cancer, HIV, immuno-inflammatory, and respiratory diseases. The healthcare company has established research teams and manufacturing facilities worldwide, providing a global distribution network, particularly across the US, Europe and Asia.

With over 1,500 active partnerships with external pharmaceutical organisations and governments, GlaxoSmithKline stands out amongst the crowd of healthcare stocks. Until recently, It also had a consumer healthcare division that has since been spun off into its own company called Haleon. The group is now purely focused on developing new treatments.

Key Metrics:

• Market Cap: £67.45bn
• Average Daily Volume: 6.67m
• HQ: Brentford, UK
• Cash/Debt: £6,532m / £22,111m

Smith & Nephew

Founded in 1856, Smith & Nephew is one of the oldest medical device manufacturers in the world. The group operates in over 100 countries, supplying medical institutions with critical equipment and consumable accessories.

The healthcare stock is renowned for its expertise in wound management with its diverse portfolio of dressings, as well as products tackling other areas. The list includes orthopaedic reconstruction (knee, hip, and shoulder joint replacements), hospital imaging systems, trauma fixation products, and tools performing a variety of medical procedures.

Key Metrics:

• Market cap: £10.9bn
• Average daily volume: 2.64m
• HQ: London, UK
• Cash/ebt: $1,290m/$3,339m

Hikma Pharmaceuticals

Hikma Pharmaceuticals is a global drug developer with a massive portfolio of over 670 generic and in-licensed products on the market today. The group’s expertise in replicating off-patent medicines drastically reduces costs for patients while simultaneously improving accessibility.

Beyond the generics, Hikma also has its own drug development pipeline for new and bespoke treatments that target various therapeutic categories such as anti-infectives, cardiovascular, central nervous system, diabetes, cancer, respiratory, and pain management.

Key Metrics:

• Market cap: £3.83bn
• Average daily volume: 1.07m
• HQ: London, UK
• Cash/debt: $450m/$846m

Spire Healthcare

Spire Healthcare is the UK’s largest independent hospital stock serving the private healthcare sector. The company has 47 facilities scattered across the country, providing the standard range of services, including diagnostics, inpatient care, and outpatient care.

The group collaborates with almost 8,150 experienced consultants to handle a long list of medical circumstances such as orthopaedics, gynaecology, cardiology, neurology, oncology, and general surgery.

Key Metrics:

• Market cap: £826.5m
• Average daily volume: 865.41k
• HQ: London, UK
• Cash/debt: £203m/£1,265m

Investing in the US healthcare industry

American healthcare stocks are bound to the same degree of regulatory restrictions. However, US healthcare spending represents almost half ($3.8trn) of the entire market worldwide. So, it’s hardly surprising that there is a far longer list of healthcare shares across the pond for investors to choose from.

Some of the leading names in this sector on the New York Stock Exchange and Nasdaq, in order of market capitalisation, are:

1. Pfizer Inc (NYSE:PFE)
2. Intuitive Surgical (NASDAQ:ISRG)
3. Moderna (NASDAQ:MRNA)
4. Masimo (NASDAQ:MASI)
5. Teladoc (NYSE:TDOC)

Are healthcare stocks right for you?

While healthcare shares are often perceived as a relatively stable and safe place to invest, that’s often not the case. As I’ve already explained, the costs of operating in this sector are exceptionally high, especially for drug developers. 

Consequently, these firms are typically highly leveraged, with enormous credit facilities being used to fund research, development, trials, and eventually manufacturing. That creates quite a bit of risk. After all, if a product fails during development or regulators decide it isn’t safe, a lot of capital can go down the drain.

Needless to say, this can make investing in healthcare stocks a risky endeavour. Even more so when it comes to the smaller players with restricted access to precious external financing. 

That means healthcare shares probably aren’t suitable for everyone. But for those willing to take on the risk, there is a multi-trillion-dollar market opportunity available to profit from. And by taking a diversified approach, investors can potentially reap substantial returns through multiple channels.

[KevelPitch adtype=151]

Disclosure

Zaven Boyrazian owns shares in Masimo, Intuitive Surgical, and Teladoc.

But that doesn’t mean buying anything with a low share price is a sensible move. After all, plenty of cheap-looking stocks today are priced that way for a good reason. There are multiple factors wreaking havoc on operations for certain industries. And those that loaded up on debt during the height of the pandemic are especially in trouble now that interest rates are rising.

However, with most investors panicking, plenty of high-quality companies have suffered double-digit share price declines despite business still booming. Needless to say, that creates a buying opportunity for my portfolio. And I think I may have identified some of the best shares to buy at the moment.

The best shares for today?

I recently took a gander at a sector virtually unaffected by rising inflation – healthcare stocks. Regardless of what’s going on in the economy, healthcare is an essential consumer expense for those unfortunate to be battling illness.

There are plenty of high-quality companies in this arena. But one that’s caught my attention today is Hikma Pharmaceuticals (LSE:HIK). The firm is the second-largest generics manufacturer in the world. It recreates existing drugs that have come off patent to improve the availability and affordability of treatments, especially in the US.

So, why is the firm on my best shares to buy now list? Since the start of 2022, the stock has dropped by around 23% after management downgraded revenue guidance for this year. However, upon closer inspection, this was caused by a delayed contract that should be realised in 2023 rather than a permanent loss of income. In other words, investors may have overreacted, creating what I believe is a buying opportunity for my portfolio with a proven high-quality business.

Taking a step back

There are risks, of course. Healthcare is a highly regulated industry that’s notorious for its difficulty in launching new products. But a more immediate threat is what’s going with profitability. The group’s profit margins have been suffering from product price erosion since 2020 as competition continues to rise.

Obviously, that’s not good. However, it may only be temporary. Management has begun to focus heavily on expanding its high-margin injectables business, where the group commands more pricing power. Furthermore, it’s also started forming partnerships to create biosimilars – the generics equivalent for biotech drugs. Based on current analyst forecasts, the biosimilars market is estimated to grow at a 15% annualised rate until 2030!

Pairing these new growth avenues with Hikma’s track record of delivering value to shareholders and its established global network makes me cautiously optimistic about its future potential. Therefore, despite the risks, I believe Hikma Pharmaceuticals is one of the best shares to buy now and hold for the next decade.

Pharma stock 

With a market capitalisation of £3.6bn, Hikma Pharmaceuticals (LSE: HIK) is one of the biggest UK biotech stocks, only trailing giants like AstraZeneca and GlaxoSmithKline. Hikma was founded in 1978. Over the years, it has been able to establish itself as an industry leader, focusing on manufacturing non-branded generic and licenced pharmaceutical products. 

However, the past few months haven’t been pretty for the firm, with the Hikma share price falling 24% year-to-date. It has also fallen around 30% in the past year. It has underperformed the wider FTSE 100 index during this period by a wide margin.

There have been several factors behind this decline. Firstly, in the recent trading update, it was announced that the company’s treatment for narcolepsy would be delayed until late 2022 or early 2023. This will impact the performance of Hikma’s Generics division this year. Indeed, revenues are now expected to total around $730m, against previous guidance of $820m. Operating margins in this division are also expected to be around 20%, falling from previous estimations of 24%. 

Secondly, the Generics business is also expected to be hit by increased competition and a challenging pricing environment. As the division contributes towards around 32% of the firm’s revenues, this is a major issue. 

Why do I like this FTSE 100 stock?

Despite these worries, I still like the future prospects of the company. Indeed, the delay to the narcolepsy drug doesn’t affect its long-term outlook as it simply shifts the revenue and profit contribution from the drug to the first half of 2023, instead of 2022. This isn’t a worry for me. 

In addition, Hikma’s other divisions are performing well, which should offset the current disruptions in Generics. For example, injectables revenue is expected to grow in the mid-to-high single-digits, which is higher than previous expectations of low-to-mid single-digits. As the injectables business contributes 41% of the group’s revenues, this is great news. 

Finally, I’m impressed with the firm’s strong shareholder returns. For example, in 2021, its dividend totalled 54 cents per share, around a 3% dividend yield. Although this isn’t among the highest in the FTSE 100, it remains a compelling reason for me to buy, especially as it’s very well covered by profits. The group also has a share buyback programme of $300m running throughout 2022, which suggests to me that the Hikma share price may be undervalued. 

What am I doing now? 

With a price-to-earnings ratio of only 10, Hikma trades at far lower valuations than other biotech stocks, such as AstraZeneca and GSK. With several new products being added to the Generics business, I also believe that future growth is realistic. Therefore, this FTSE 100 stock looks ‘dirt-cheap’ to me right now. I may add some Hikma shares to my portfolio. 

Companies in the FTSE 100 cover a diverse range of industries. But it’s biotech stocks that have caught my attention as a growth investor. Thanks to the pandemic emphasising the importance of this sector, the development of new medicines, vaccines, and treatments appears to be accelerating. And that looks to me like an opportunity.

Is AstraZeneca one of the best shares to buy now?

Shares of AstraZeneca (LSE:AZN) have had quite the stellar run lately. The UK’s largest biotech group has been firing on all cylinders. The latest earnings show a 51% jump in total revenue and a 20% rise in core earnings. So, seeing this FTSE 100 stock climb almost 30% in the last 12 months is hardly surprising.

There are a lot of factors at play. But it doesn’t take long to realise this growth is being driven by a steady stream of positive clinical trial results and regulatory approvals. And this may only be the beginning. Just last week, management reported its phase three breast cancer drug, Enhertu, showed a 49% increase in efficacy versus traditional chemotherapy.

A recent study by Fortune Business Insights forecast the breast cancer therapeutics market to grow by a compounded annual rate of 13.1% between now and 2027, reaching a total size of $55.3bn. Needless to say, that’s a big opportunity for the company. And with additional encouraging phase three trial results for its cardiovascular and Devic’s disease treatments, the future looks bright for investors.

Ignoring the acquisition of Alexion, earnings-per-share (EPS) for 2021 came in at an impressive $5.29 (£4.23). Compared to today’s stock price, that places the price-to-earnings ratio at just under 20. While that’s certainly not “cheap”, it’s far from unreasonable. And with such an impressive lineup of new drugs being submitted for regulatory approval, this seems like a fair price to pay for my portfolio. That’s why I think AstraZeneca could be one of the best shares I could buy now.

Another FTSE 100 biotech stock worth watching

Discovering new and improved treatments is exciting. However, for patients, especially in the US, the affordability of these treatments is often a problem. That’s where generic companies like Hikma Pharmaceuticals (LSE:HIK) come into play.

When a drug comes off patent, other companies can swoop in and create their own versions. Consequently, the market is flooded with alternatives that drive the prices down. For the most part, Hikma’s portfolio consists of chemically-based generics. But management has recently begun delving into the realm of biotech with its biosimilars in partnership with Celltrion.

Because creating biosimilars is difficult, it is a relatively uncontested arena. But that’s creating a massive opportunity. In fact, analyst forecasts predict a 40.2% annualised expansion of biosimilars market size until 2029. And with plenty of resources at its disposal, I believe this FTSE 100 stock could be one of the best shares to buy now for my portfolio.

The reason for this is that the FTSE 100 has been propped up by gains from a handful of its largest members, such as Shell and BP. Elsewhere, most stocks have been falling. In this piece I want to look at three big losers that I’m thinking about buying for my portfolio.

The right medicine

Generic medicine specialist Hikma Pharmaceuticals (LSE: HIK) has fallen by 35% over the last year. The company recently also lost its chief executive, Siggi Olafsson, who quit shortly after Hikma issued a profit warning due to a delay in the launch of a new product.

It’s disappointing, but these things happen. Looking beyond this, I don’t see too much wrong with Hikma’s business. The company’s earnings per share are still expected to rise by 8% this year and its operating margin should stay above 20%.

The main concern I have is that Hikma’s performance could disappoint again later this year. That might be one reason for Olafsson’s departure.

However, with Hikma shares now trading on less than 10 times forecast earnings, I think the valuation probably offers a margin of safety. Hikma is on my list of stocks to buy this summer.

This FTSE 100 stock is getting dropped

My next choice is television group ITV (LSE: ITV). This unpopular stock has fallen by 45% over the last 12 months and is going to be demoted to the FTSE 250 later in June.

ITV shares have slumped due to the company’s decision to increase spending on its streaming services. A new ITVX service is due to replace ITV Hub later this year.

To me, this seems like a no-brainer. Television is moving online, and the UK’s biggest commercial broadcaster needs to move with the times.

ITV has increased spending on IT and programme content to support these changes. That will cause a slump in profits this year. CEO Carolyn McCall expects this spending to deliver future growth. But we can’t be sure of this.

However, with ITV shares now trading on five times earnings and offering a well-supported 7% dividend yield, I’m still thinking about adding to my existing holding.

A special situation

My final FTSE 100 share could soon disappear. Cybersecurity group Avast (LSE: AVST) agreed a merger with US rival Norton LifeLock in October last year.

Avast’s share price hit 650p when the final deal was announced. But the shares have slumped to under 500p since March, due to an ongoing competition investigation that could halt the deal.

This fall means that Avast shares are now at the same level they were at before merger rumours began last summer. The current price looks reasonable to me and I like this business, so I’m thinking about buying the shares.

My only concern is that there might be a third option I haven’t thought of that results in a worse deal for shareholders. I can’t see what this might be, but it’s impossible to rule out at this time.

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

Airtel Africa 

What it does: Airtel Africa provides telecommunications and mobile money services in sub-Saharan Africa. 

By Royston Wild. Demand for telecoms services remains largely unchanged during all points of the economic cycle. Therefore, it’s my belief that Airtel Africa (LSE: AAF) could be a top growth stock for June as inflation rises and recessionary risks grow.

City analysts think Airtel’s earnings will rise 12% in the current financial year (to March 2023). They think profits growth will accelerate to 16% next year too. 

And so at today’s prices, the FTSE 100 share trades on a bargain-basement forward price-to-earnings (P/E) ratio of 8.4 times. 

I don’t just think Airtel’s a great buy for these uncertain times, though. Its focus on the fast-growing markets of Africa provides it with exceptional long-term revenue opportunities. Product penetration remains low across both the telecoms and financial services industries in its markets. Meanwhile, personal wealth levels are rocketing and population levels are rising strongly too. 

Pre-tax profits at Airtel leapt 75.6% in the financial year to March, the latest financials this month showed. These came in at a forecast-beating $1.2bn. I expect the Footsie business to continue impressing as its customer base balloons. 

Royston Wild does not own shares in Airtel Africa. 

Rolls-Royce

What it does: Rolls-Royce is a multinational civil aerospace, defence, and power systems company based in the UK.

By Dylan Hood: The Rolls-Royce (LSE:RR) share price has struggled ever since the pandemic first hit. However, the firm recently announced a trading update that contained some encouraging metrics. For FY2021, gross margins increased 23.4% compared to FY2020, leaving the company profitable for the first time since the pandemic’s onset over two years ago.

The firm is also making encouraging steps in its plan to rebuild its balance sheet, and has committed to achieving positive free cash flow by Q3 of 2022.

Investors have already been reacting positively to this news, with the price of Rolls-Royce shares climbing over 6% throughout May. While still under the £1 mark, I believe now could be a great time to open a position in my portfolio for future growth.

Dylan Hood does not own shares in Rolls-Royce.

Softcat

What it does: Softcat provides IT infrastructure solutions. Its areas of expertise include cloud computing, data, and cybersecurity.

By Edward Sheldon, CFA. Softcat (LSE: SCT) shares have experienced a significant pullback since September 2021 and I think this has presented an attractive buying opportunity.

A recent trading update showed that the tech company still has plenty of momentum. Indeed, the group advised that for the quarter ended 30 April 2022, it generated double-digit year-on-year growth in revenue, gross profit, and operating profit. It added that it now expects operating profit for the full year to be “slightly ahead” of its previous expectations.

Meanwhile, after the recent pullback, the stock’s valuation now seems quite reasonable. At present, the forward-looking P/E ratio here is about 27, which is not high in my view, given the company’s track record, growth potential, high level of profitability, and strong balance sheet.

Of course, if future growth is disappointing, the stock could underperform. All things considered, however, I like SCT’s long-term risk/reward profile.

Edward Sheldon owns shares in Softcat.

Ceres Power

What it does: The Sussex-headquartered firm is a world leader in metal-supported solid oxide fuel cell technology.

By Dr. James Fox. The hydrogen industry has enormous potential and that’s why I’m keeping a close eye on Ceres Power (LSE:CWR).

The UK-based fuel cell developer is yet to turn a profit. However, revenue is growing. Ceres reported a 44% increase in revenue and other operating income in 2021, reaching £31.7m.

As such, it currently has a price-to-sales revenue of around 40. That’s not cheap, but equally this also reflects the sector’s potential.

Ceres licences its energy technology to individual manufacturers, reducing costs relating to the building of manufacturing facilities. It also has lucrative partnerships with Bosch and Doosan.

Doosan is preparing for a soft launch of its 10kW SOFC product this year and will open a 79,200sq metre plant in 2024. With production being scaled up, 2022 could be a transformative year for the firm.

And with the share price falling over the past 12 months, it looks like a good time to add this stock to my portfolio. 

James Fox does not own shares in Ceres Power.

Petrofac

What it does: Petrofac designs, builds, manages and maintains oil, gas, and renewable infrastructure internationally. 

By Michelle Freeman. The recent windfall tax announcement may have made headlines for the oil & gas giants like BP and Shell, but it also created an instant demand for oil & gas infrastructure services. 

Why? Because the ability to offset investment spend against the new levy means that right now, plenty of UK-based projects will have been given a huge business case boost.  

But getting the go-ahead is only part of the battle. They’ll also need to be able to spend the money – and that’s going to lead to a spike in demand for the next few years at least. 

Petrofac (LSE:PFC) is one of a few companies that are well positioned to benefit from this upturn – alongside the wider trend globally as infrastructure spend returns with the high oil and gas prices. 

The best part for me, though: it’s not a one-trick pony, having also diversified nicely with its complementary renewables infrastructure arm. Win-win! 

Michelle Freeman does not own shares in Petrofac.

Howden Joinery Group

What it does: Howden Joinery is the UK’s largest vertically integrated trade kitchen supplier within the home improvement industry.

By Zaven Boyrazian. Renovating or constructing new kitchens may not sound like a lucrative investment opportunity. Yet Howden Joinery (LSE:HWDN) seems to disprove that. Looking at its latest trading update, the firm delivered an impressive 21.8% revenue growth – almost twice what it’s historically achieved. And that’s during its low season.

With its peak trading period just around the corner, the stock looks primed for a bounce-back after its recent tumble in the general market turmoil. There are valid fears of a slowdown risk due to rising inflation and a consumer spending crunch. However, given management continues to pursue its expansion plans in the UK and France, there appears to be a high degree of internal confidence that I like to see.

From what I can see, Howden Joinery is delivering its fastest growth in years, yet its share price is trading near a 52-week low. That, to me, looks like a fantastic buying opportunity for my portfolio.

Zaven Boyrazian does not own shares in Howden Joinery Group.

Hikma Pharmaceuticals 

What it does: Hikma develops, manufactures and markets a wide range of high-quality generic, branded and in-licensed pharmaceutical products. 

By G A Chester. Hikma Pharmaceuticals (LSE: HIK) has been out of favour for a while. Its shares are down around 30% over the last 12 months. 

The latest knock to market sentiment came in May. Hikma downgraded its guidance on the expected performance of its generics division in 2022. 

Management’s previous guidance was for revenue growth of 8%-10% over 2021’s revenue of $820m and an operating margin of 24%-25%.The new guidance lowered revenue to $710m-$750m and the operating margin to around 20%. 

The reason was a change in expectations of the launch timing of a generic medicine, shifting its revenue and profit contribution from the second half of 2022 to the first half of 2023. 

I don’t think this damages Hikma’s long-term growth story. The recent resignation of chief executive Siggi Olafsson — to pursue other opportunities — adds further uncertainty. But I reckon the weak share price represents a great opportunity for me. 

G A Chester does not own shares in Hikma Pharmaceuticals 

Greencore

What it does: FTSE 250 firm Greencore supplies convenience foods to retailers and food-to-go outlets all over the UK.

By Roland Head. Convenience food specialist Greencore (LSE: GNC) is bouncing back strongly from the pandemic. The firm reported sales up 34% to £771m during the half year to 25 March, thanks to “strong growth in food to go”.

I think the company’s growth is set to continue. City forecasts suggest Greencore’s pre-tax profit will hit £63.5m in the 2022 financial year and £80.6m next year.

The business is expanding beyond its historic strength in sandwiches to offer foods such as salads, sushi, ready meals and soups and sauces. Over time, I think this strategy is likely to support steady long-term growth.

Of course, larger retailers such as supermarkets are tough customers. They’re likely to keep pressure on Greencore’s prices and margins.

Today, Greencore shares trade on 12 times 2022 forecast earnings, falling to a forecast P/E of nine for 2023. That looks good value to me.

Roland Head does not own shares in Greencore.

Plus500 

What it does: Plus500 provides online trading services in Contracts for Difference (CFDs) across a range of asset classes.

By Charlie Carman. Benefitting from the rise in retail trading activity over the pandemic, the Plus500 (LSE: PLUS) share price has soared nearly 90% since the start of the UK’s first lockdown in March 2020.

The FTSE 250 fintech company’s latest quarterly results revealed impressive 33% year-on-year increases in revenue and EBITDA. Admittedly, Plus500 experienced a 35% decline in active customers compared to Q1, 2021. However, average revenue per user rocketed by 104%, which sufficiently offsets any potential concerns for me.

Plus500 continues to expand its global operations. The Israel-based business recently obtained a new licence in Estonia, improving its core product offering in European markets. In addition, its acquisition of EZ Invest Securities signalled an entry into the substantial Japanese retail trading market.

It seems elevated stock market volatility is here to stay for the time being. I believe Plus500 shares should perform well in this macroeconomic environment. I’d buy in June.

Charlie Carman does not own shares in Plus500. 

Dr. Martens

What it does: Dr. Martens is a luxury brand that sells footwear. Its boots are a cultural staple and its best selling item.

By John Choong – With stagnating retail sales data over the last quarter, I was originally bearish about Dr. Martens (LSE: DOCS)’ prospects. However, its stellar FY 2022 results blew my expectations out of the water. As a result, its share price surged by 18%.

Being a luxury brand, Dr. Martens has managed to pass its costs onto customers without negatively impacting its top and bottom lines. In fact, its profit margins saw an increase to 19.9% for the year, along with strong sales figures. This has pushed its free cash flow in the right direction too.

Additionally, management expects a strong FY23, citing “huge headroom for growth in key markets”, as well as a strong wholesale order book with fixed factory prices. The latter allows the firm to hedge against inflationary pressures, which is crucial given the macroeconomic environment. 

Therefore, I’m optimistic about the future of the company, and will be looking to buy shares in the near future.

John Choong has no position in Dr. Martens

Wizz Air

What it does: Wizz Air is a Hungary-based airline, specialising in the operation of short-haul flights around Europe, North Africa, and the Middle East.

By Andrew Woods. The improvement in the firm’s passenger numbers in recent months is quite staggering. For May, Wizz Air (LSE:WIZZ) flew 4.1m people, with a load factor of 84.2%. This was up from 3.6m and 83.4% in April. These passenger figures for May and April also equate to 390% and 542% increases, compared to the same periods last year.

As pandemic travel restrictions are relaxed, the airline is expecting a very busy summer. It has been recruiting cabin crew at pace to try and keep up with demand, but many flights have already been cancelled. This disruption could subside once the business hires more employees.

Wizz Air recently signed a memorandum of understanding with the Saudi Arabian government to explore the potential development of routes throughout the country. This would greatly increase the company’s presence in the Middle East.

In addition, a cash balance of €1.3bn suggests that the firm is in decent financial shape and well positioned for returning to higher capacity in the coming months.

Andrew Woods does not own shares in Wizz Air.