I bought the stock a while ago based on its fundamentals and the outlook for the company. And for sometime at least it was a winning stock in my portfolio. The question now, though, is whether it can bounce back or will it continue to languish. 

Trading update has strong positives

The FTSE 250 company reported a decent 7% increase in revenue for the four months of 2022 ending April, compared to the same time last year. It is also positive in its outlook for the rest of the year. It expresses confidence in being able to pass on increases in costs, which should bode well for its bottom line. 

Further, it also acquired Marley, a market leader in roof systems. Marshalls mentions it as being “cyclically resilient”, which could be a definite positive at a time when growth is slowing down. The UK just reported a contraction in economic output in March compared to February. 

In fact, the company itself points out in its update that the Construction Products’ Association has reduced its forecast for growth in UK market volumes for 2022 and 2023, because of a “more uncertain trading environment”. This is probably one reason why investors are downbeat about the stock now. 

Also, while its revenues have grown, the growth has slowed down from last year, which could be playing on investor sentiment towards the stock too. The company chalks it up to a strong comparator period, which included “record seasonal sales volumes”, however. 

Healthy FTSE 250 stock

Keeping everything in mind, I definitely do not see a reason to sell Marshalls now. In fact, considering that the company expects its debt levels to remain in check, I will continue to hold on to it even in the event of an economic slowdown, which could impact it. Also, it posted healthy numbers for last year as well, which is encouraging. It is also a dividend stock, with a yield of around 2.7%. This is marginally higher than that for the FTSE 250 as a whole. 

What I’d do about Marshalls

However, I do see why falling growth could be a deterrent for investors. This is especially so as the FTSE 250 stock is not exactly cheap with a price-to-earnings (P/E) ratio of almost 20 times. This is higher than even many financially healthy FTSE 100 companies. Still its outlook looks good to me. And if its earnings rise, its P/E could drop. I might just buy more of it in the coming days. 

Construction and building supplier

Marshalls is one of the UK’s leading landscaping product manufacturers. It manufactures and supplies a multitude of products such as natural stone and concrete for the construction, home improvement, and landscape markets. It has roots stretching back to 1890s.

Marshalls sells its products via three main channels. These are to builders merchants and private builders, large construction firms, and direct to consumers.

As I write, shares in Marshalls are trading for 722p, which is similar to this time a year ago when shares were trading for 721p. In the three months, shares have dropped from 845p to current levels. Is now a good opportunity for me to buy cheap shares in an established company?

Positive performance and outlook

Marshalls’ most recent trading update was a half-year report announced in August, which made for excellent reading. It reported that revenue has surpassed 2020 and pre-pandemic 2019 half-year levels, as did gross profit, which shows strong recovery since the pandemic affected it. Debt levels had decreased from 2020 and pre-pandemic levels, which was due to excellent trading and favourable market conditions. An interim dividend of 4.7p per share was declared. This was the same amount as in 2019. There was no interim dividend in 2020. Many UK shares cancelled dividends in 2020 to conserve cash.

Marshalls has a good track record of performance too. I do understand past performance is not a guarantee of the future but I use it as a gauge nevertheless. Prior to the pandemic-affected 2020 results, revenue and profit grew year on year for three years in a row. I expect the next full-year results to surpass 2019 levels if this half-year report is anything to go by.

The outlook ahead is positive for Marshalls in my opinion. The construction sector is booming right now and the UK government has committed to spending £100bn on projects over the next few years. This could boost Marshalls and it is also taking its own steps to grow further. It has decided to spend £21m in 2021 as capital investment to aid growth plans. This includes a new manufacturing plant in St Ives.

UK shares have risks

Despite my bullish stance, I must note credible risks of investing in Marshalls. It is well known that macroeconomic issues affect the construction industry most of the time. Current supply chain issues as well as rising inflation and costs could affect operations, performance, and the bottom line. This could affect investor returns. Furthermore, the pandemic is not over and any new variants could derail performance, like it did in 2020 at the beginning of the pandemic. Other similar UK shares could be affected by similar issues.

I would buy Marshalls shares. At current levels, I think the shares are a tad expensive with a price-to-earnings ratio of close to 30, so if shares were to cheapen I would be even happier to add them to my portfolio. I’m confident the construction boom will benefit Marshalls, and it has a good position in its market to continue growing, performing well, and providing investor returns.

Based on that 8% figure, someone who invests £300 a month in stocks can realistically expect to have made a healthy £422,565 at the end of 30 years. This is the sort of capital pile one might need to have built to offset an increasingly mediocre State Pension. So it’s good to know that one doesn’t need to break the bank to build a big buffer for retirement.

I think now is a great time to go shopping for stocks for my portfolio as well. The September sell-off means that lots of top-quality British companies are trading at ultra-cheap prices. Here are two of the best UK shares I would buy with £300 in my pocket.

One of the best mining shares to buy

I think silver producer Hochschild Mining (LSE: HOC) is one of the best unloved UK shares to buy after falling heavily in September. Rising bond yields and a resurgent dollar have hit precious metals prices hard over the past few months.

It’s possible that these price drivers could remain and play and damage profits at mining companies like this, too. But I’m confident that silver and gold values could rebound strongly given the murky economic outlook. As analysts at TD Securities say, “fears of stagflation are growing ever stronger, which could once again spur interest in precious metals down the road”.

Inflation is soaring while economic growth is threatening to flatten. This is the perfect concoction for silver prices, and for Hochschild Mining’s share price, to rebound strongly. In addition, rising Covid-19 cases and fresh tension between economic superpowers China and the US could also supercharge demand for safe-haven assets like these. Hochschild’s low price-to-earnings ratio of 10 times certainly leaves plenty of scope for fresh share price gains.

Building big returns

I’d also happily stash £300 in landscaping products supplier Marshalls (LSE: MSLH) today. It wasn’t that long ago that the business was reporting better-than-expected trading after 2020’s washout smashed revenues. The recovery was broad-based, too, with sales booming across all of its domestic, public sector, commercial, and international markets.

Okay, Marshalls still trades on a high forward P/E ratio of 25 times even after September’s sell-off. This sort of high valuation could prompt further near-term share price weakness if trading begins to worsen. If supply chain issues weigh on revenues and push up costs, for example, that would cause problems for Marshalls.

However, I remain convinced Marshalls could be one of the best stocks to buy for my portfolio to ride the revival in the British construction industry. I reckon it’s a particularly great way to make money from the resurgent home improvement and house building sectors too. And I think it could make me a lot of money beyond the short to medium term as well.

Marshalls touched 771.5p per share at one point in Wednesday business. This was its most expensive since November. The landscape products company has since settled back but, at 763p, remains 6% higher on the day.

Marshalls reports “strong” trading

Marshalls has risen on news that “recent trading has been strong” and that “the improving trend has continued.” During the four months to April, revenue soared 46% year-on-year to £191m.

The impact of Covid-19 lockdowns helped drive that huge annual improvement. However, sales at Marshalls were also up 6% from the same four months in 2019.

Breaking down the numbers, Marshalls commented that “strong demand in the Domestic end market, improved trading in the Public Sector and Commercial end market and further growth in the International market” were the key drivers for its strong recent performance.

Sales rise across the board

Sales to Domestic markets just about doubled (rising 99%) between January and April, Marshalls said, to £57m. Revenues in this area — responsible for around 30% of the group total — were also up 20% from the corresponding 2019 period.

Meanwhile, sales to its Public Sector and Commercial end markets roared 32% higher from the first four months of 2020, to £122m. This is also “a slight increase” from the same four months period in 2019, the company said, “after adjusting for the impact on sales caused by the planned reduction in Premier Mortar sites in the second quarter of 2020.”

Public Sector and Commercial customers account for around two-thirds of group turnover. And Marshalls said that it plans to continue focussing on higher-growth markets like infrastructure projects in Road, Rail and Water Management.

Finally Marshalls saw sales to International customers soar 27% and 32% from the first four months of 2020 and 2019 respectively.

Full-year profits tipped to beat forecasts

Marshalls also provided an encouraging update concerning the condition of its balance sheet. It said that net debt had dropped below £100m as of the end of April, to £98m. This was down from £112m at the same point in 2020 and £122m in 2019.

Commenting on today’s results, Marshalls said: “The board is encouraged by the sustained increase in demand during the first four months of the financial year.” As a consequence, the business now expects trading in 2021 for the full year “to be ahead of its previous expectations.”

The company noted the Construction Products Association’s recent spring survey, which painted a bright picture for its operations. This predicted an uptick in market volumes of 12.9% in 2021 and 5.2% in 2022.

“This continues to reflect a more positive trading environment and the external purchasing and consumer confidence indicators continue to strengthen,” Marshalls said.

After the stock market rally of last November, this may look like no big deal. After all, many shares’ prices have gone back up to pre-pandemic levels. 

A financially strong FTSE 250 stock

Except that in this case, it may in fact be a big deal. The BBOX share price did not suddenly rise in the vaccine discovery euphoria. It is actually doing quite well.  

As per full-year results for 2020 released yesterday, the warehouser saw a 20% increase in operating profits. Government support has aided the housing market, but property companies have still been dented by the pandemic. 

Bright prospects

BBOX has managed strong performance nevertheless, because of its niche in logistics. This has been in high demand because of the e-commerce boom. As a firm believer in e-commerce’s potential, I see this alone as reason for me to buy the stock. But there are others too.

The company has a positive outlook for 2021 and believes that long-term structural drivers are favourable for it. Growth pickup this year should be positive for consumer demand. There could be greater stability in property markets post-Brexit as well. 

Despite all that is in its favour, BBOX’s earnings ratio is at around 18 times. It is not low but it is not anywhere close to the highest either. 

The downside

The one disappointment that I think could put off investors is its dividends. BBOX reduced the dividend amount last year given the Covid-19 uncertainty, but it has not increased it despite a great set of results for 2020 and a positive outlook as well. 

An alternate FTSE 250 stock

Companies with far less certainty have done so. One example is the FTSE 250 landscaping products’ provider, Marshalls (LSE: MSLH). 

Even though it has reported a decline in both revenue and profits for 2020, it has managed to reinstate its dividend, albeit by a small amount. As per my estimates, its dividend yield is at around 0.6% at present. 

This is possibly based on its positive performance in 2021 so far and its outlook. It reports a 7% increase in sales and 12% increase in order up to February compared to the same time last year. 

Investors have clearly given Marshalls’s earnings a thumbs-up. It was a big index gainer as its results were released.

Risks to MSLH

There is much to like about the stock. It has seen a 45% increase after last year’s lows, but the one challenge here is that its earnings ratio is pretty steep at over 100 times. 

Property markets are still policy dependent. An untoward change in either appears unlikely, but we have to bear risks in mind when investing. At its current share price levels, MSLH can be particularly vulnerable to any adverse developments. 

Conclusion

I like both stocks, but BBOX appears to be the most attractive from a long-term perspective. MSLH has a strong case for it too, and in any case, I have already bought the FTSE 250 stock.

FTSE 250 growth

The first is magazine publisher Future (LSE: FUTR). What I like about this business is the fact it has a consistent growth track record.

Over the past five years, management has steered the business from acquisition to acquisition. These deals have helped the firm build a strong portfolio of publishing assets. This, in turn, has attracted advertisers to its platform. By increasing the number of publications it owns, Future has been able to offer advertisers a better package, which has led to increased revenues and profits for the group. 

The next acquisition is the owner of GoCompare. While this is larger than anything Future has completed before, I think it’s a sensible decision. The deal will take the company into the highly lucrative comparison market, where it can use its existing clout to drive better deals with advertisers. 

As such, I reckon this FTSE 250 growth stock can continue to produce high total returns for investors. 

Race for space

One major trend that’s emerged this year is the so-called ‘race for space’. Homebuyers have been rushing to snap up properties with large gardens, which has pushed up prices in the most desirable areas. It’s also pushed up sales of DIY and home improvement products. That’s been a boon for Marshalls (LSE: MSLH). 

The FTSE 250 supplier of hard landscaping products recently reported sales to the domestic end of the market were up 10% year-on-year during the four months to the end of October. This improvement allowed the group to repay all furlough monies received by the government during 2020, as its financial position was better than expected. 

I think this year’s trading performance is going to help the group meet its near-term goals. For example, the company’s debt has fallen, which should provide it with more financial firepower to chase growth in the years ahead. At the same time, the UK’s buoyant housing market may lead to increased demand for its landscaping products. 

Based on these tailwinds, I’m optimistic about the group’s long-term potential. 

Insurance income 

The coronavirus pandemic has also forced significant changes on the insurance industry. Claims related to the pandemic have cost the sector hundreds of billions of dollars, and companies have reacted by increasing the prices they charge to clients. 

This could be good news for FTSE 250 group Lancashire Holdings (LSE: LRE). The specialist insurance organisation managed to avoid the worst of the pandemic, but it’s still going to benefit from rising insurance prices. It recently raised money from investors to capitalise on the improving market environment, and that suggests the company could see strong earnings growth in 2021. 

Lancashire has an impressive history of profitable underwriting. When many other companies have struggled, it has still turned a profit. What’s more, the business tends to return almost all of its net income to investors with dividends. In the past, that’s produced a dividend yield of nearly 10%. 

While the company won’t be returning extra cash to investors over the next 12 months, I think the business will resume this policy in the next few years.

Room for optimism

If as an investor you have remained unconvinced, however, allow me to share more data with you. It’s true that the quarterly rolling GDP numbers look bad. But the monthly numbers are actually improving. In May, GDP grew by 1.8%. I know this doesn’t sound like a lot. But compared to March, when it shrank 6.9%, and April, when it shrank 20.3%, it’s a big improvement. 

I say this because the increase has happened while the lockdown was still underway. By extension, this suggests that data for the post-lockdown period could be even better. It may even show the wished-for ‘V-shaped’ growth. In fact, Bank of England Chief Economist Andy Haldane already sees signs of a V-shaped recovery. There are risks of a precarious recovery getting derailed, of course, but I think we now have room for optimism about the economy. 

As I drill deeper into the data, the construction sector’s recovery looks quite encouraging to me. It grew by 8.2% in May, after being the biggest faller in April. It fell by a whole 40.2% during that month. On a quarterly basis, it’s still in a bad state, but the first ray of hope has begun to show. As a result, I think some of the best UK shares to buy now are construction stocks.

Best UK shares to buy

FTSE 100 Irish construction giant CRH is one example. There’s a lot to like about it. First, its share price has recovered well from the stock market crash. And this is despite the construction sector’s poor performance. Two, it’s last trading update in April was positive. Three, it’s a growing and profit-making company, with operations across geographies. Its geographical exposure hedges the risks to business from concentration in a single economy.

Similarly, FTSE 250 landscaper Marshalls is another investment option in the construction segment. Its share price was at all-time-highs before the stock market crash hit. While it suffered in the lockdown, its latest update points to a comeback in activity. Like CRH, it too is seeing rising revenues and is profitable. Unlike CRH though, it’s largely based in the UK. For investors who are keen on UK-centric shares, especially after the construction turnaround seen in today’s GDP report, I think this is one of the best UK shares to buy. 

On January 16, in a trading update, Marshalls’ board said it was confident of meeting expectations for the year ended December 2019. There should be no nasty surprises for investors in the full annual report which will be available in two days.

Since Marshalls is both increasing revenues and earnings at a clip, and paying sustainable dividends, it has the characteristics of both a growth and income stock. Stocks like these are not common, especially those in companies that can trace their origins back to 1890.

Rock solid

Supplying natural stone and concrete landscaping products may sound boring, but it has been a good business for Marshalls. Revenues increased by 8.18% on average over five years, from £359m in 2014 to £491m in 2018.

At the same time, operating margins fattened from 7% to 13% and return on equity also increased, coming in at over 20% in 2018. Earnings and dividends per share nearly tripled and doubled over five years, to 26.08p and 12p respectively in 2018.

Revenues have grown organically, by promoting older products and developing new ones, and with some bolt-on acquisitions. Acquiring companies has not jeopardised the health of the balance sheet. Profitability improvement has come by way of focusing on higher-value-added products, be they old or new.

Those expectations that the board is confident of meeting would see the trends over the last five years continue. The consensus among brokers is that earnings per share will rise to 28.6p in 2019, and again to 29.4p in 2020.

Home focus

The bulk of Marshalls’ operations and supply chains are UK-based. There is a manufacturing facility in Belgium, and sales offices in the US, China and Dubai. However, everything outside the UK accounts for just 5% of revenues.

This geographic footprint does not expose Marshalls to the supply-chain disruption we have seen as a result of the coronavirus outbreak. Border frictions between the EU and the UK won’t matter too much to Marshalls.

Marshalls’ revenues are exposed to the mood of the UK economy though. Still, there are a few things that should smooth out its revenues and earnings. It serves a mix of commercial, domestic and public markets. Beyond stone and concrete for landscaping, Marshalls supplies other things like street furniture and mineral products.

It should be noted that it excelled after the Brexit vote when business investment and growth was generally lacklustre. Marshalls’ management highlights the continued outperformance of the Construction Products Association’s growth figures as evidence of it bucking the trend. And there is always the option of trying to boost international sales if things turn sour at home.

Building for the future

I think buying shares in Marshalls now could pave the way for portfolio profits. Considering the growth that is expected, the discounted price is attractive, which should tempt growth investors. The dividend yield is a little under 2%, but dividends are well covered by earnings and expected to increase, which should entice income investors too.

However, there are a number of companies I expect to release positive trading releases in the days ahead. These are updates that could help the share prices of some companies gain ground should broader market fears moderate. And one of them is Marshalls (LSE: MSLH).

Good news!

While the wider UK construction market has been in the doldrums of late, landscaping products specialist Marshalls has kept on releasing robust trading statements. It’s why the company’s share price boomed 85% during the course of 2019.

The FTSE 250 firm kept the run going with a solid year-end trading update. And I’m expecting a sunny commentary on current activity when preliminaries are unpackaged on Thursday, 12 March.

Latest purchasing managers index (PMI) data for the construction industry showed a sector still in decline. A reading of 48.4 for January showed a market still shrinking below the inflationary/contractionary watermark of 50, sure. But it was a huge upgrade from a reading of 44.2 in December and was the best result since last April.

It’s quite possible the reading will be even better in January. This will be the first full month since the Conservatives won late 2019’s general election, an event which axed the chances of a destructive no-deal Brexit last month. Keep an eye on the next PMI release for construction firms due Tuesday, 3 March. This could add more fuel to the Marshalls share price prior to that upcoming annual statement.

A profits powerhouse

Marshalls certainly impressed with its pre-close mid-January trading statement. Then it advised revenues leapt 10% year-on-year in 2019, thanks to acquisition of Edenhall in December 2018. The move to buy one of the country’s major producers of concrete-facing bricks boosts its exposure to the newbuild homes market, and will likely prove a wise move given Britain’s need to turbocharge homebuilding rates during the next decade.

Even without the contribution of its blockbuster acquisition, Marshalls’ performance last year was encouraging given tough construction market conditions. Annual revenues, excluding Edenhall, rose 3% last year.

It’s no wonder City analysts expect Marshalls’ long-running record of annual growth to continue. Bottom-line rises of 7% and 6% are forecasted for this year and next respectively. The company’s recent comments that  “the underlying indicators in the New Build Housing, Road, Rail and Water Management markets remain supportive” have no doubt boosted broker confidence too.

A forward price-to-earnings (P/E) ratio of 25.3 times might make Marshalls look expensive on paper. However, I consider its resilience in tough market conditions to be worthy of a healthy premium.

It’s a brilliant buy before the likely release of more top trading news in March, in my opinion.

The stocks I’ll be discussing can all be added to your Stocks and Shares ISA, meaning that the gains made from them would be tax-free. Given their potential to generate large returns, this tax wrapper will be very useful should you have high capital gains when you decide to exit the investment.

Building for the long term

The first firm I am keen on is Marshalls (LSE: MSHL). The FTSE 250 firm is a supplier of materials for the construction sector, ranging from stone and concrete to more developed water management systems.

Performance over the past year has been strong, gaining some 67% over the past 12 months. This has been down to a combination of factors, although the immediate one is good financial performance.

In the latest trading update last month, the company expects group revenues to be up 10% to £542m from the previous year, despite poor weather and Brexit uncertainty in the sector. This outperformance despite some hamstringing leads me to conclude that this is a stock waiting to move significantly higher this this year.

In the trading update, Marshalls noted that the outcome of the general election had created “a more certain political environment” that will benefit the business. Should we see Johnson agree a trade deal this year, then we could see a strong bounce back in the construction sector.

Looking for a spark

From a rallying stock that could go further, I’ll turn to a falling stock that could recover. That describes Marks & Spencer (LSE: MKS), the embattled FTSE 250 firm that has had several disappointments over the past couple of years. Store closures and a poor Christmas trading period saw downward revisions on trading updates for the firm. 

My colleague Andy Ross summarized M&S’s latest trading update here. 

Looking forward, I think Marks & Spencer could be a turnaround buy for aggressive investors due to the shift in personnel at the top. Last week saw the announcement of Eion Tonge as the new CFO, set to come in to try and turn the finances around. In addition Katie Bickerstaffe was recently appointed as chief strategy and transformation director, and the incumbent Melanie Smith will head up the new partnership with Ocado (one initiative I am excited about).

These types of changes at the top have worked for various firms in the past to give new direction and new life to struggling companies, so this could be the spark we have been waiting for to jolt the share price back higher.