I am searching for companies battling temporary headwinds that may capitalise on the economic recovery over the next few years.

A great example is pub and bar operator Mitchells & Butlers (LSE: MAB). 

FTSE 250 recovery play

This business suffered a 50% drop in sales in its 2021 financial year. However, in its latest trading update, the company told investors that like-for-like sales for the 16 weeks ended January 12 came in just 3.9% lower than pre-pandemic levels. 

Unfortunately, plenty of headwinds could hit growth in the months ahead. The cost of living crisis is the organisation’s main challenge, with wages and costs rising across the business. 

Still, analysts believe the company’s sales will return to, and potentially exceed, pre-pandemic levels over the next two years. Based on these projections, the stock is trading at a forward price-to-earnings (P/E) multiple of just 9.9.

It is also trading at a significant discount to value. The price-to-book (P/B) value of the shares is currently 0.7. In theory, any profitable company should trade at book value, implying the stock is undervalued by around 30%. 

Based on these factors, I would buy the dirt-cheap FTSE 250 company for my portfolio of recovery investments. 

For me, the homebuilding sector also currently looks attractive, despite the government’s threats to force developers to pay for the UK’s cladding crisis. This could inflict a multi-billion pound penalty on the industry. All companies in the sector are now on notice.

Nevertheless, I also believe that the sector benefits from significant favourable tailwinds. These may help it ride out any government action.

One of the best shares to buy today 

Most importantly, the country’s housing market is structurally undersupplied, which will take years to rectify.

In the meantime, it looks as if house prices will continue to rise, benefiting FTSE 250 developers like Redrow (LSE: RDW). These companies should be able to sell more properties at higher prices with the right tailwinds. 

Right now, it looks to me as if the market is ignoring this positive. At the time of writing, the stock is trading at a forward P/E multiple of 6.8. It also supports a dividend yield of nearly 5%. 

According to the company’s latest trading update, Redrow has been rising to the challenge. It added 1,400 plots to its current landbank in the 19 weeks to the beginning of November, with more added to the long-term land bank.

The group has an order backlog of £2.1bn properties and nearly £300m of net cash on the balance sheet. That should keep it snapping up new landholdings and pushing forward with developments. 

Considering the state of the UK housing market, the company’s current valuation and its potential over the next few years, I think this would make a great addition to my portfolio of FTSE 250 shares. 

Mitchell & Butlers sees improved performance

Consider Mitchell & Butlers (LSE: MAB), which released a trading update earlier today. The group, which owns pub and restaurant brands like All Bar One, Browns, and O’Neills, has reported encouraging numbers for the post-lockdown period. Since bars and restaurants are allowed to reopen indoors in mid-May, its like-for-like (LFL) sales have risen to 97% of their pre-pandemic levels. And in the past eight weeks, which covers the two months since ‘freedom day’, the number is even better at 104%. 

This is an encouraging sign for a stock that was profitable before Covid-19. And going by the fact that the FTSE 250 stock is an established brand, I expect that it can rise more as the pandemic recedes. Much progress has already been made, and while some uncertainty remains, it is one I am seriously considering. This is especially since its share price is still around 40% lower than the early 2020 highs. 

Fuller Smith & Turner is also recovering

Similarly, Fuller Smith & Turner also reported somewhat encouraging trends in the post-lockdown period earlier today. For the seven weeks to 18 September, its LFL sales are at 86% of their 2019 levels. It also says that country pubs have benefited from domestic travel in the summer months. And its London pubs are also showing a pickup in activity. Also, much like Mitchell & Butlers, its share price is also below its early 2020 levels, indicating that there is scope for improvement as uncertainty subsides further. 

Marston’s could pick up too

Other pub stocks are worth considering too. One of them is Marston’s, which is still a penny stock after it fell fast in early 2020. It has not recovered since, and is still trading at half the highs of that time. In late July, shortly after all restrictions were lifted, the pub reported better than expected performance on account of warm weather and the Euro 2020 tournament. In this case though, the one drawback is that the company’s performance was slipping even before the pandemic happened. Also, there were talks of its acquisition earlier in the year. So, I maintain that I would wait for more updates to see where it is at.

Recovery stocks I’d buy

Overall, I think pubs as a segment can rise significantly from current levels if the virus remains under control. With more consumer spending likely as people step outside the house, it can pick up fast. But I would wait for detailed financial results from these companies before deciding my pick from among them. 

Pubs are still struggling

FTSE 250 stock Mitchells & Butlers (LSE:MAB) is a pub company operating in the UK and Germany. Its well-known brands include All Bar One, Harvester, Innkeeper’s Lodge, O’Neill’s, Toby Carvery, and several more. The company also operates some property leasing.

It has a £1.9bn market cap compared with rival Whitbread’s £6.9bn market cap. It’s been burning cash at a rate of between £35m and £40m per month, and its debt costs it around £51m per quarter.

It’s widely expected that there will be a rush on pubs and social entertainment once the lockdowns are lifted. But it’s likely to take a long time before Mitchells & Butlers becomes profitable again. The Mitchells & Butlers share price has recovered 70% in a year and is up 30% in the past three months. While this shows confidence in the company, it makes me nervous and reluctant to invest. The Covid-19 situation is still bad in many parts of the world, and we’re not out of the woods yet. I think this stock could easily plummet again if the path out of lockdown is slower than anticipated.

Signs of growth in polymer demand

Polymer production company Victrex (LSE:VCT) has had an easier year than many companies, but Covid-19 still affected the business in the second half of 2020. Lower production led to higher costs, but 2021 is showing signs of growth. It’s cash strong with debt facilities available if need be.

Polymer demand depends on the market for plastics. This is not slowing down with considerable growth opportunity in emerging markets.

The Victrex share price is up 5.6% in a year and down 11% in the past three months. The FTSE 250 company reinstated its dividend in December after seeing a notable improvement in demand from the auto, electronic, and medical markets. Its dividend yield is 2.2%. It has a £1.8bn market cap and forward price-to-earnings ratio is 26.

However, profitability is likely to be slow and as it’s a globally facing stock, Covid-19 remains a threat to its success. I’m not confident enough to jump into this stock yet, but will keep it on my watch list.

FTSE 250 tech stock

UK tech company Micro Focus (LSE:MCRO) has done rather well since the pandemic hit. Its share price is up nearly 40% in a year and 15% in the last week. Its share price is close to its 52-week high and last week the company announced it’s partnered with US tech stock success story Snowflake to deliver data-centric protection to international clients.

It has a £1.5bn market cap, dividend yield is 2% and earnings per share are negative. I like a tech stock with a dividend, but I find the company’s very high debt levels concerning. And tech is a cut-throat industry with plenty of stocks to choose from. The sector has been on a tear through 2020 and is now falling out of favour with investors. Therefore, I’m not tempted to buy Micro Focus shares today, but will keep an eye on its progress.

Britons were excited to return to pubs from July, but local lockdowns, Boris Johnson’s suggestion that the UK is “now seeing a second wave” of Covid-19 and the introduction of a 10pm curfew suggest that a pint might soon be out of the question once again.

Let’s see if these three FTSE 250 companies are worth the risk.

J D Wetherspoon

J D Wetherspoon’s 52-week low of 559.5p per share came just before each of its 873 sites closed in March. According to its website, 858 of those have currently reopened, but its share price is still well below 1,000p. In September 2019, 1,500p was average.

Despite this, the Eat Out To Help Out scheme and increased outdoor seating areas have helped the FTSE 250 company get back on its feet, while its current ‘Stay Out To Help Out’ initiative is providing a leg up against competitors. 

On top of that, it seems confident in its own long-term growth. Two new J D Wetherspoon pubs have opened since July, the reduction of VAT on food sales in pubs and restaurants to 5% has allowed further price reductions, and various waivers and loans have given increased financial security.

At the moment, J D Wetherspoon seems like it could be the safest FTSE 250 pub stock, and Roland Head agrees that J D Wetherspoon is likely to remain a good long-term investment.  

Marston’s and Mitchells & Butlers

Both Marston’s and Mitchells & Butlers tell a different story. They might both be FTSE 250 companies trading at much lower share prices than this time last year, but I have my doubts.

While Marston’s sale of 168 pubs and its 40% share of a new venture alongside Carlsberg UK (Carlsberg Marston’s Brewing Company) looks good on paper, both are attempts to reduce its rather crippling debt, which sits above £1bn and isn’t covered by cash flow.

Mitchells & Butlers started the year with a 2.6% increase in first quarter LFL sales, but Covid-19 hit the company hard. Like Marston’s, it is in a lot of debt and its earnings aren’t high enough to cover its interest.

While it doesn’t seem like either company will come crashing out of the FTSE 250 or go out of business, they both seem to have less growth potential yet more risk of being hit hard by Covid restrictions than J D Wetherspoon.

The takeaway pint

The 10pm curfew took a similar chunk out of the share price of all three companies, and they’ve all started to recover at similar rates. As such, they remain on equal (in this regard, at least) footing, and so my views haven’t changed.  

While Covid restrictions loom large, all three come with risk.

But different investors have different appetites for risk. While Matthew Dumigan believes that Marston’s is a good post-pandemic buy, I’d still buy J D Wetherspoon. A market crash could allow an exceptionally cheap price to turn into post-lockdown profit, but even without that, it seems like J D Wetherspoon is one of the safest long-term FTSE 250 investments.  

That decline has been reflected in the share price of many pubs. Today I’d like to discuss three FTSE 250 businesses that may deserve your attention as the lockdown is slowly eased. I believe investors who buy into them at the current depressed levels (or even lower) are likely to enjoy healthy returns in long-term portfolios.

JD Wetherspoon

In a Covid-19 world, where pubs have been hit hard, JD Wetherspoon (LSE: JDW) shares have fallen close to 40% so far this year. In March, they hit a 52-week low of 492p.

When the group released a trading update in late March, it also cancelled the interim dividend and announced a delay to most capital projects to conserve cash. Its trailing P/E stands at 14.1.

1979 saw the first Wetherspoon pub open in London. As of early 2020, it operates close to 900 in the UK and Ireland. Its long experience, as well as strong balance sheet, will likely enable the group to weather any further headwinds that may be associated with the new normal in our lives. And the company has already shared details of how management plans to operate its pubs under social distancing guidelines.

Marston’s

Last week, the Marston’s (LSE:MARS) share price skyrocketed on news that it will merge the brewing business with Carlsberg UK. They will form Carlsberg Marston’s Brewing Company, in which Marston’s will own a 40% stake.

Chief executive Ralph Findlay said the deal will help the group “to further reduce its debt and focus on maximising value from its high-quality pub estate.” It is currently the UK’s largest brewing business, with six breweries and 11 distribution centres. It also has 1,400 pubs, restaurants, cocktail bars and inns. 

Prior to the the announcement, MARS stock traded at around 30p. On 22 May it closed at 66p. Yet it is still a long way off from its 52-week high of 133.8p.

Although there may be some profit-taking around the corner, in the long run this partnership will likely be good for the company and shareholders.

Mitchells & Butlers

In response to the adverse financial effects of the pandemic, Birmingham-based Mitchells & Butlers (LSE: MAB) has been working to keep afloat. It has secured a temporary waiver on its loan repayments. Meanwhile management has taken a wide range of steps to cut costs. 

Established in 1898, it’s also one of the largest operators of restaurants, pubs and bars in the UK. The brands include All Bar One, Nicholson’s, Harvester and Toby Carvery. Due to the pandemic, it has had to close all of its 1,700 of its establishments. As a result, its finances have come under considerable strain.

And shareholders have felt the pinch. In early January, the shares traded around 450p, not far off the 52-week high of 483p. In March, they hit a 52-week low of 92.3p. Now they are around 152p.

The trailing P/E ratio stands at 4.5. I believe most of the bad news may already be priced into the share price.

Mitchells & Butlers (LSE:MAB) runs around 1,780 managed pubs, bars and restaurants throughout the UK. It has been hard hit by the coronavirus pandemic and Mitchells and Butlers shares are down 66% year-to-date. Last week the FTSE 250 company received a temporary waiver on its loan repayments, extended to 8 June. This inspired confidence and its share price gained 7% on the news.

The shares have a price-to-earnings ratio below 5. Its earnings per share are 33p and it has a 55% debt ratio. The FTSE 250 company has put over 99% of its employees on furlough and cut pay for its remaining employees and the board.

Covid consequences

Mitchells & Butlers brands include The Harvester, Toby Carvery, All Bar One and Miller & Carter chains. The hospitality sector is unlikely to restart before July and when it does, things will differ from before. To ensure social distancing measures are in place, it is likely that fewer customers will be permitted to establishments. This could cause prices to go up so that landlords can cover their overheads.

But that would mean fewer people will be able to afford to eat or drink out. Some people may also be fearful of going back to pubs and restaurants or to socialise for extended periods. For these reasons, I am not yet feeling bullish towards the hospitality sector.

Investing in wealth management

Wealth management may not be gearing up for high demand during a recession, but it is a cyclical business that will always have core clients.

FTSE 100 wealth management business Standard Life Aberdeen (LSE:SLA) has been minimally impacted thus far by the pandemic. Its staff have transitioned to home working with ease and it has a strong balance sheet that should see it through a stock market downturn. Assets under management and administration at Standard Life Aberdeen were estimated to be approximately £490bn on April 30.

The share price is down 32% year-to-date but it is up 29% since the March market crash. There is likely to be further volatility ahead though, so it is not a stock for those with a short-term outlook. However, as a long-term play, I think Standard Life Aberdeen will weather the storm.

It will take some time before the extent of the financial impact of the pandemic becomes clear. However, it is unlikely to make positive reading. With the country increasing its debt at an unprecedented pace, the Treasury and the Bank of England will need to seriously consider how debt restructuring can take place. Reviving the economy once the lockdown is over will be paramount and I imagine wealth management firms will play a part in the recovery. Standard Life Aberdeen has a price-to-earnings ratio of 20 and a dividend yield of 9%. I think this yield makes it an attractive share to buy today when so many dividends have been cut or cancelled.

Food and clothes

But Marks & Spencer (LSE: MKS) looks like it’s heading for worse than that, with sales in the Christmas quarter falling 0.6% in the UK, and by 2.3% internationally. There’s some small comfort in a 0.2% rise in UK like-for-like sales, though that was driven by a 1.4% gain in food sales — as is becoming all too familiar, clothing and home goods sales declined again, by 1.7% this time on a like-for-like basis, and by 3.7% in total.

Chief executive Steve Rowe told us of “an improved performance in Q3,” but also spoke of “a challenging trading environment in the lead up to Christmas.” He added that “the changes we made earlier in the year in Clothing have arrested the worst of the issues of the first six months and we are progressively building a much stronger team for the future.” But don’t we hear something like that almost every time M&S reports?

Although full-year expectations are unchanged overall, gross margins are “expected to be around [the] lower end of guidance.”

The market was unenthused, and the shares dropped 9% in morning trading — and they’re down 65% since a peak in May 2015. I know M&S is in its latest restructuring phase, and its recently announced plan to move into the (potentially lucrative but very competitive) active fashion business might prove a turning point. But I’ve seen too many M&S turnaround plans over the years to be tempted.

Booze

Meanwhile, pubs, bars and restaurants operator Mitchells & Butlers (LSE: MAB) enjoyed a more successful festive season, reporting like-for-like sales growth of 5.6% over the core three-week period, with first-quarter like-for-like up 3.5%.

This impressive performance included “strong performances on all of the key festive days,” with food sales up 3% and drink sales up 1.8%. I can’t say I’m too surprised, because the Brexit antics of our politicians in December would be enough to drive anyone to drink — and had that effect on me more than once.

The company is continuing to invest in its chain of establishments, with 81 conversions and remodels in the year to date, and one new outlet opened.

Having been in the doldrums for several years, the Mitchells & Butlers share price has been performing remarkably well in the latter half of 2019 — and from a low point for the year in May, we’ve seen a 93% rise. But after that surge, is it still a buy?

M&B has been through a troubled period and is in the process of rebuilding itself. Investor confidence ebbed so low that in 2017 the shares were trading on a P/E as weak as around seven, and after last year’s price recovery we’re now looking at a forward multiple of a bit over 11.

The downside for now is that dividends have not yet been reintroduced after having been suspended during the crisis years — but that should come.

These days I insist on seeing a real tangible turnaround from a recovery prospect before I’ll consider it, and I’m seeing that here. M&B is a cautious buy for me.

Trailing P/E ratios for both indices stand at 16.1 and 23.1 respectively. Many analysts are now debating whether the decade-long bull market may be on its final leg and these P/E ratios may indicate that the indices may be ready to take a breather.

Regardless of whether that happens, the stock market is home to many well-managed companies that have robust earnings. Today, I’d like to look at three companies that I believe deserve a closer look.

BAE Systems

My first pick is aerospace and defence contractor BAE Systems (LSE: BA). Year-to-date the stock is up almost 22%.

Management recently provided an upbeat trading update, mostly due to increases in UK defence spending and US military budgets. As a result, the FTSE 100 giant has built an impressive order backlog. Its major multi-year contracts in the US include the F-35 fighter and armoured multi-purpose vehicles.

The group is also increasing contracts among NATO countries, including the Netherlands and the Baltic states. In 2017, Qatar and BAE had signed an agreement for 24 Typhoon aircrafts. Management confirmed that the deal has now been accelerated.

I find the business to be well positioned for sales growth in the new year. The stock is currently trading on a forward P/E ratio of 12.2 and offering a dividend yield of nearly 4%. The next ex-dividend date will be in April.

Greencoat UK Wind

Renewable power investment trust Greencoat UK Wind (LSE: UKW) invests in operating onshore and offshore UK wind farms that are currently producing income.

Management has highlighted that “the revenue that operating wind farms receive in the UK is made up of a number of components, primarily from the sale of power produced and green benefits accredited”.

The FTSE 250 fund has been steadily growing its portfolio since its IPO in 2013 and we can expect management to weigh up and capitalise on a range of opportunities in 2020 too.

According to Renewable UK, the leading not-for-profit renewable energy trade association, renewables provide nearly a third of UK power and half of this is generated from wind energy. The world of energy is changing and this modern technology is becoming increasingly popular with the public.

Year-to-date, UKWs shares are up about 18%. The current dividend yield stands at 4.6% and the stock is expected to go ex-dividend in February.

Mitchells & Butlers

In 2019, shares of All Bar One to Harvester pubs group Mitchells & Butlers (LSE: MAB) are up an eye-popping 70%. Yet the stock is currently trading at a forward P/E of only 11.5 and is likely to reach new highs in the year ahead. 

On 28 November, investors cheered  full-year results for the period ended 28 September. The FTSE 250 pub chain reported higher-than-expected full-year adjusted operating profit fuelled by stronger food sales. Full year revenue came at £2.2bn, up 4% year-on-year.

Management also succeeded in reducing net debt to £1.56bn from the £1.69b it was at  in FY2018 and improving the operating margin slightly to 14.2%.

Our readers may also be interested to know that the group is working with Just Eat and Deliveroo to improve utilisation of its kitchens that may have spare capacity.

Any downside? If you are an income investor, the group does not offer a dividend. 

With final results slated for Friday December 13th, I reckon now is a great time to load up on Hollywood Bowl Group (LSE: BOWL) shares.

The ten-pin-bowling operator stunned the market with fresh financials last month, ones in which it advised that profits would beat expectations and rise 10% for the fiscal year to September. Signs that strong trading has stretched into the new year would likely give Hollywood Bowl’s share price an extra boost, though this is not the only reason to be optimistic.

The firm also suggested in October that, owing to its strong balance sheet, it could start returning excess cash to its shareholders soon. Clearly good news on this front could really help the AIM company fly.

Royston Wild does not own shares in Hollywood Bowl Group.

Rupert Hargreaves: Mitchells & Butlers

Shares in Mitchells & Butlers (LSE: MAB) have risen nearly 100% over the past six months, making the company the best performing stock in the FTSE 350. It doesn’t look as if this trend is going to come to an end any time soon. 

Shares in the pub and restaurant operator have charged higher in 2019 as the company’s sales have grown faster than expected, and costs have been kept under control. 

Even after this performance, Mitchells still looks cheap. The stock is trading at a forward price-to-earnings (P/E) ratio of just 11.8 for 2020, compared to the industry median of 16.4. If sales continue to outperform expectations, I don’t think it will be long before the group closes this valuation gap. 

Rupert Hargreaves owns no share mentioned.

Kevin Godbold: GlaxoSmithKline

In October, GlaxoSmithKline (LSE: GSK) reported sales growth across all its business divisions in the third quarter of its trading year. The guidance on full-year earnings rose from a decline to now being flat. That’s not spectacular, but it’s progress after a difficult few years driven by patent-expiry issues.

The R&D pipeline is contributing to rebuilding earnings and the dividend will be flat for the year. But the company hasn’t cut the payment in more than a decade and a half. I think GlaxoSmithKline looks solid, and the valuation could uprate to reflect progress, perhaps during December and beyond.

Kevin Godbold does not own shares in GlaxoSmithKline.

Edward Sheldon: Prudential 

My top stock for December is Prudential (LSE: PRU). At the time of writing, it trades on a forward-looking P/E ratio of just 8.6 and offers a prospective dividend yield of 3.3%. 

What I Iike about Prudential is that, following its recent demerger with M&G, it’s now predominantly focused on the savings and insurance needs of those in Asia. Given that wealth across Asia is rising at a rapid rate, while market penetration of financial products such as savings accounts and life insurance is still relatively low, I see considerable long-term growth potential here. 

With the stock a little out of favour right now due to US/China trade wars and political instability in Hong Kong, I believe it’s a great time to be building a position. 

Edward Sheldon owns shares in Prudential.

Tezcan Gecgil: Direct Line Insurance Group

On 20 November, Direct Line Insurance Group (LSE: DLG) announced its Q3 update. Management was encouraged that the motor insurance segment has been returning to modest growth, helped by improving market conditions. This improvement is an important reason why you may consider DLG for a long-term portfolio, especially if you are a contrarian investor. The level of car sales and thus the legally required motor insurance are correlated to the general health of the economy.

I expect to see an uptick in consumer confidence once the general election is behind us. Meanwhile, shareholders can enjoy a dividend yield of about 7.2%.

Tezcan Gecgil does not own shares in Direct Line Insurance Group.

Paul Summers: Carnival

My suggestion for December? Don’t try to make a quick profit from the election outcome and concentrate on buying resilient businesses that should do well regardless of who is in power.

One company I continue to build a position in is leading cruise operator Carnival (LSE: CCL). A price-to-earnings (P/E) ratio of 9 still feels too good to pass up considering its historic valuation and potential to tap into rapidly growing markets such as China.

I’m more than happy to wait for a recovery and pocket the secure-looking dividend (4.9%) in the meantime.

Paul Summers owns shares in Carnival.

G A Chester: Imperial Brands

I’m making Imperial Brands (LSE: IMB) my top buy for December, because it’s become one of the Footsie’s most unloved stocks. It’s lost about 60% of its value in recent years. Clearly, investors need to have two key things to buy into this stock: no ethical aversion to investing in tobacco, and a strong stomach for taking a contrarian position against the herd.

I think the rewards could be high. In my view, Imperial’s mid-single-digit P/E and double-digit dividend yield more than price in the well-known industry headwinds, and underestimate the company’s continuing pricing power, free cash flow generation, and scope to adapt and evolve over time.

G A Chester has no position in Imperial Brands.

Karl Loomes: Sirius Minerals

Not without some risks perhaps, but embattled miner Sirius Minerals (LSE: SXX) is starting to offer the potential for too large an upside to ignore, in my opinion. As I see it, there are three scenarios shareholders are likely to face – two of which should earn those who buy stock now money.

The first is that it effectively goes bust. In my eyes, an equally likely scenario – given the size of the deposit it sits on and the infrastructure already in place – is that it is either bought out or merged with another firm, and investors get some decent returns. The last scenario is that it manages to secure enough funding to keep it going, eventually moving into production and making very good money. This is the scenario that could make investors rich.

Karl has shares in Sirius Minerals.

Jonathan Smith: Greggs

Greggs (LSE: GRG) has already seen strong share price appreciation recently, up around 53% over the past 12 months. Year to date sales are up 13.4%, which impresses me even more considering how the high street has been struggling as a whole. 

Strong demand for innovative products such as the vegan sausage roll has enabled Greggs to differentiate itself from other bakers, and has enabled it to grow customer loyalty and good publicity.

I think this growth is only set to continue, especially if we see a boost to the domestic economy following the election and Brexit. 

Vegan mince pie anyone?

Jonathan Smith owns no share mentioned.

Kirsteen Mackay: Games Workshop

Games Workshop Group (LSE: GAW) saw a share price rise of over 30% in November.

Its cult brand, Warhammer, is a fantasy board game. Signing new animation licences has almost doubled royalty income, compared with a year ago, and profits are up.

2,000 UK schools have signed up to the Warhammer Alliance, which supplies students with equipment to get started in the hobby. Painting Warhammer models can help Scouts earn model-making badges and playing the game contributes to achieving the Duke of Edinburgh Award. The company has operations globally and a growing, loyal fanbase; its price-to-earnings ratio is 28, dividend yield is 2.4% and earnings per share are £2. I think there’s a lot to like.

Kirsteen Mackay owns no share mentioned.

Ambrose O’Callaghan: Pets at Home Group

My top stock for December is Pets at Home Group (LSE: PETS). The stock had climbed over 100% from the prior year as of close on 26 November.

Pets at Home posted an 18.9% year-on-year increase in profit before tax to £45m for the six months to 10 October. The company’s earnings were powered by retail revenue growth of 8%. Millennials have overtaken baby boomers as the biggest pet-owning generation, and this is fuelling huge sales growth in the pet retail market. This is an industry I’m excited about as we move into the next decade.

Investors will be paying a premium for Pets at Home Group’s growth as it possessed a price-to-earnings ratio of 35 at the time of this writing. However, it does offer a nice boon in the form of a 3.6% dividend yield. This is a stock I love for the long term.

Ambrose O’Callaghan has no position in Pets at Home Group.

Stepan Lavrouk: HSBC Holdings

Shares of British banking giant HSBC (LSE: HSBA) are currently trading around 580p a share, presenting a great opportunity for income investors to add this solid dividend payer to their retirement Stocks and Shares ISA.

The main attraction for me with this stock is its dividend yield – HSBC currently yields around 6.8%, which far outstrips the FTSE 100 average of 4.4%. What’s more, management has assured investors that they do not intend to cut the dividend for the full year.

For investors looking to make a play on the British financial sector, I believe that HSBC should be the clear favourite.

Stepan Lavrouk has no position in HSBC.

Tom Rodgers: Indivior

Opioid drug addiction treatment manufacturer Indivior (LSE: INDV) settled its legal woes this past summer and now its future now looks brighter than bright, in my opinion.

Investors can also pick up shares for a song: the firm is forecast to grow its earnings by more than 16% next year and I think it is hugely undervalued. City analysts agree with me, saying the INDV share price could be as much as 93% lower than its true value.

Return on equity is a whopping 84.5%, too. I say it’ll be a bumper year ahead for this stock. 

Tom Rodgers has no position in Indivior.

Peter Stephens: GlaxoSmithKline

With the world economy facing an uncertain outlook, defensive shares such as GlaxoSmithKline (LSE: GSK) could become increasingly sought-after by investors. The company’s financial performance is less dependent on the wider economy’s outlook than many of its FTSE 100 index peers. As such, it may offer relatively robust growth prospects in 2020.

GSK’s pivot towards pharmaceuticals could enhance its long-term growth prospects. Demand for medicines is likely to increase as a growing world population that is ageing may demand greater levels of healthcare. With a 4.5% yield, the stock seems to offer good value for money.

Peter Stephens owns shares in GlaxoSmithKline.

Manika Premsingh: The Sage Group

The FTSE 100 accounting software provider Sage Group (LSE: SGE) saw a share price dip when its latest results showed a hit to profits recently. But investors have been quick to shrug that off and the share price has quickly climbed back to pre-announcement levels.

The bounce-back is hardly surprising given the capital gains from the share. I first wrote about it a little over a year ago and from then to the last close, the share price has risen an unexpected 46%. It’s a good defensive share, which is expected to continue to deliver over time, even with short-term fluctuations as it continues to re-adjust its strategy. I’d be looking out for more of these dips in December.

Manika Premsingh has no position in The Sage Group.

It posted a positive trading update today, reporting higher full-year adjusted operating profit sustained by stronger food sales at its 1,700 pubs and restaurants throughout the UK. Its share price is up over 6% as I write. 

The £2bn company has a price-to-earnings ratio of 19, which is below the industry average of 29. Earnings per share are 24p, but it’s not a share for income investors because it doesn’t offer a dividend. It actually used to, but it cancelled its dividend payments for 2018 due to a high level of debt, pension obligations and an uncertain outlook. It has since been ploughing money back into the business through a tailored investment programme, during which it has opened seven new sites while converting and remodelling 239 outlets.

It has a 58% debt ratio and its PEG value is very appealing at 0.3, as a value of less than 1 can indicate a company is undervalued.

The Mitchells & Butlers share price has risen 64% in the past year and 33% since August.

Positive returns

In the year to 28 September, pre-tax profit rose 36.2% to £177m which is up 3.9% on the previous year. Food sales were up 3.4% and drink sales 3.2%. Average spend on food and drink was also up 3.4% and 4.5% respectively.

Mitchells and Butlers operate 17 brands, which include some of the country’s best-known restaurants and pubs, such as Harvester, Toby Carvery, O’Neill’s and All Bar One.

Considering the Brexit environment and belt-tightening throughout the UK, I think it is doing well and this points to a cautiously optimistic future ahead.

Sustainability

Although the food and drink industry will continue to face the challenge of rising costs, an increase in health-conscious consumers means many are seeking top quality when eating out. This includes locally sourced, superior ingredients.

All Bar One gives an example of how it is tackling this with a new eco‐minded and sustainable beer and cider menu. This includes beer whose costs partly go to planet-improving charitable causes with packaging/manufacturing waste recycled, while Pip & Wild is a range of premium fruit ciders that are naturally low in calories and use natural ingredients.

Consumers like to feel good about what they’re eating and drinking and in turn, are prepared to pay more for the privilege.

The company has proved it is on the right track as it continues to build sustained sales growth, which converts into profit growth. As its share price has already seen a spectacular spike in the past year, can it continue to rise? I think it probably can, although with the current economic climate it will continue to face challenges. Yet even if the UK goes into a recession, people will continue to eat, drink and socialise and many of these brands are household favourites that I think will continue to be a go-to for get-togethers with friends and family.