Centamin

I’m thinking of buying UK gold shares for November. And Centamin’s (LSE: CEY) dirt-cheap share price has put it near the top of my shopping list.

The Egypt-focused metal producer trades on a forward price-to-earnings (P/E) ratio of 8.7 times just now. It also carries a healthy 5.4% dividend yield for 2022.

Centamin’s share price has rocketed more recently thanks to bubbly trading news. Revenues leapt 19% in the third quarter, to $218.1m. Meanwhile gold production soared 23% year on year to 127,512 ounces.

I think the FTSE 250 share is a great buy for the long haul. Having constant exposure to gold is a good idea to boost my wealth when times get tough. Bullion prices tend to increase during economic and political crises, pushing profits at such companies higher.

I also like Centamin due to the quality of its Sukari mine and the work it’s taking to improve productivity and cut costs. The firm advised this month that capital projects here remain on schedule.

As I mention, earnings at companies like this are sensitive to the prices of the commodities they produce. But this isn’t always a good thing. In the short-to-medium term, gold prices could fall if the US dollar continues to rise, for example. This could pull Centamin’s share price sharply lower.

Still, as someone who invests for the long term, this gold producer still looks super attractive. And there’s also a good chance that yellow metal values will increase next month as signs of a global recession steadily increase. 

WH Smith

I’m also considering buying retailer WH Smith (LSE: SMWH) this November. Its share price has tanked in October and I think this presents a great dip-buying opportunity.

At current prices, the FTSE 250 firm trades on a forward price-to-earnings growth (PEG) ratio of just 0.4. A reading below 1 suggests that a stock is undervalued by the market.

WH Smith faces an uncertain outlook in 2023 as the global economy cools. It might see a sharp reduction in customer numbers at its airport and train station outlets. The newsagent might also see revenues slip as people cut back on discretionary spending.

That said, as a potential investor I find recent trading released highly encouraging. The company upgraded its full-year profits expectations over the summer. And last month it praised the continued “strong” performance of its Travel division. Revenues here rose 129% in the six months to 27 August.

WH Smith operates in 29 UK airports and 100 airports internationally. And it remains committed to expanding its Travel division to capitalise on rising passenger numbers. The International Air Transport Association (IATA) thinks the global air travel industry will “expand substantially” over the next 20 years. This provides a significant structural opportunity for the company to exploit.

But the FTSE 250, which tends to be a better reflection of the health of the UK economy, is down 10% over the past month. And while my portfolio has taken a hit, it’s also a good time for me to look at buying more of those stocks that I believe in the most while they’re trading at knockdown prices.

So here are two stocks that have taken a battering in recent weeks that I’m looking to buy.

NatWest Group

NatWest Group (LSE:NWG) had been one of the shining lights of my portfolio. But the stock has fallen 14% over the week and is currently down 8.5% over the past 12 months.

The stock plummeted after the government’s mini-budget caused shockwaves through the banking sector. Many companies withdrew a big slice of their lending products from the market with the Bank of England (BoE) forced to intervene.

Things worsened when it was reported that the government was considering changing the BoE’s money-printing programme to avert a £10bn payout to banks.

However, there is one big positive. And that’s the fact interest rates are rising and might even hit 6% next year. A 6% base rate is really going to slow the appetite for new loans — that’s what it’s supposed to do. But it will also have a phenomenal impact on revenue.

Net interest margins (NIMs) have risen considerably this year and it’s already had an impact on banks’ revenues. But with interest rates potentially doubling over the next six months, banks should become vastly more profitable.

I appreciate that inflation and recession forecasts are not good for credit quality but, because of expanding margins, I’d buy more NatWest shares today.

WH Smith

WH Smith (LSE:SMWH) is down 14% over the week and 31% over the year. Perhaps, more interestingly, the company is down 40% over three years. But the company recently said group revenue is coming in “comfortably in excess” of pre-Covid levels.

WH Smith said that travel revenues have surged to 129% of 2019’s pre-Covid level in the 26 weeks ended August 27, and group revenues hit 112% of 2019’s result over the same period. But high street revenues were still lagging, it said.

Moreover, brokerage Berenberg recently highlighted the company’s defensive growth profile and limited exposure to cost inflation, adding that the retailer’s North American expansion story can drive shareholder returns for years to come.

In addition to this, I’d also suggest that demand for travel is pretty robust right now, despite the macroeconomic environment, while airport footfall and airline seat capacities are improving. The company’s outlets are predominantly positioned at train, bus and airport terminals.

Trading just below 1,200p, I’d add more WH Smith stock to my portfolio.

Low-level investor sentiment and current market correction makes for a great opportunity to find undervalued companies to invest in. When I’m building my portfolio, I’m looking for companies that are able to weather short-term problems such as rising inflation and ultimately produce long-term gains.

If I had £1,000 spare this September, I would invest £500 across two cheap UK shares – one in the retail industry and the other in defence. Let’s take a look at them.

Retail

British retail has had a tough time in recent years. Not only were plenty of businesses forced to shut during Covid-19, but since reopening many have struggled given the rising costs of running a business and consumers spending less due to a rise in the cost of living.

One company I think could bounce back is WH Smith (LSE: SMWH). Down just over 6% in the last year, I believe that the current price of 1,466p looks like an attractive entry point.

To see how the company might perform in the long term, I’m looking at data from the travel industry as a large part of WH Smith’s revenue comes from its airport outlets.

In June, WH Smith said the travel division was performing particularly well, so much so that full-year results are now set to be “at the higher end of analysts’ expectations”.

As international travel continues to recover, WH Smith’s airport footfall will increase and this could lead to potential expansion – something the company is already looking into after the success of its Chicago and Las Vegas airport stores.

Of course, WH Smith’s success relies on a strong global economy and is extremely dependent on the travel sector, an industry that has seen much uncertainty recently given problems such as staff shortages.

A potential decrease in winter holiday-goers could also prolong WH Smith’s recovery as its airport revenues are likely to be lower than anticipated, at least in the short term. 

Defence

The other stock I would invest £500 in is one of the UK’s largest defence contractors, QinetiQ (LSE:QQ).

The FTSE 250 stock is up 23.16% year to date, partly driven by the increase in military spending following Russia’s invasion of Ukraine.

I believe the stock could go up further in the coming years given the new Prime Minister’s pledge to increase defence spending to total 3% of GDP by 2030. Other countries such as those that are NATO members may increase spending in this area given growing geopolitical tensions and threats.

QinetiQ reported strong Q1 earnings recently. It has a cash position of £225m, and during its results the company said it predicts “mid-single digit organic revenue growth”, which is impressively high for a UK company in this sector.

73% of QinetiQ’s revenue comes from the UK government, meaning the company is over-reliant on the government’s funding and contracts. If defence spending is cut in coming years, which is a possibility given the current economic climate, then the stock may not see the current growth levels it predicts.

There’s a variety of macroeconomic issues that could continue to pull the value of my investment ISA much lower too. These include soaring inflation, aggressive central bank rate hikes, and a global resurgence in Covid-19 cases.

I’m still buying stocks!

But the threat of a fresh bear market — perhaps even a stock market crash — isn’t stopping me from building my Stocks and Shares ISA.

This is because I buy UK shares with a long-term view. I look for stocks I believe will deliver a spectacular capital gain over say a decade, or more.

There are clear dangers to many stocks I own in next 12 months, perhaps a bit longer. Though I intend to cling onto them in the expectation that I will still make a huge capital gain from them.

2 UK shares for an ISA

Here are two top stocks I’d use my own ISA allowance to buy today. I think they will deliver spectacular investor returns.

1. Agronomics

Agronomics (LSE: ANIC) is a share I expect to soar in value as the theme of ethical, or responsible, investing takes off.

This venture capital business invests in firms that produce agricultural products directly from cell cultures. It has spread its net wide too as it owns stakes in manufacturers of lab-grown beef, chicken, and pork, even leather and pet food.

Demand for these types of products are tipped to soar as consumer worries over animal welfare and emissions levels from traditional farming methods grow.

Analysts at Boston Consulting Group believe that ‘alternative protein’ products like this could account for 22% of all the world’s protein consumption by 2035.

The companies Argonomics invests in, like Mosa Meat, are tiny. So they lack the huge budgets that food giants such asTyson Foods — one recent entrant in the lab-grown meat sector — have to exploit this growing trend.

But Agronomics is taking steps to make a big impact on the market. The range, and the quality of the cutting-edge companies it has invested in, mean it still has exceptional investment potential.

2. WH Smith

I believe WH Smith (LSE:SMWH) could prove a great buy for ISA investors over this time frame too.

I like this UK share because of its ongoing international airport expansion programme. The business currently has 125 stores waiting to open and tender activity to add to its estate is ongoing.

What this means is that the business could deliver exceptional profits growth as the global commercial aviation sector grows. Airbus thinks worldwide passenger traffic will grow at an annualised rate of 3.6% over the past 20 years. The number of people passing through WH Smiths doors could therefore be set to balloon.

Trading at this UK share came at the top end of forecasts in the 15 weeks to 11 June. I’d buy the stock, even though the impact of rocketing inflation on travellers’ spending power is a near-term concern.

However, I think the travel industry is much closer to pre-pandemic levels than their share prices suggest.

So, here are two travel stocks that I’ve bought or am looking to buy more of for my portfolio.

easyJet

Things haven’t looked too rosy for easyJet (LSE:EZY) in recent weeks as travel chaos hit UK airports. The firm has cancelled hundreds of flights amid a shortage of staff, partially because of Britain’s tight labour market.

The firm has since lowered its initial guidance. The airline now expects third-quarter capacity (the period to June 30) to be around 87% of 2019 levels. It also said that Q4 capacity would be at 90%.

This isn’t what shareholders wanted to hear, but I don’t think it’s particularly bad news.

Demand for travel is clearly very high after two years of Covid-induced disruption. Passengers are also paying a lot more for their tickets too, although figures highlighting the increasing prices vary.

Labour shortages represent one headwind, fuel costs are another. But, easyJet is relatively well prepared for this. The airline said it was 71% hedged for the second half of the year.

Another headwind is interest rates and its impact on debt repayments. Thankfully, easyJet has no further debt maturities until the 2023 financial year. At the end of the first quarter, the net debt position was £600m.

There’s clearly risk here, but I’m willing to buy more easyJet stock at the current 414p. In the long run, I believe the airline will prosper.

WH Smith

Then there’s WH Smith (LSE:SMWH). Yes, that’s right. OK, it isn’t a typical travel stock for sure, but its fortunes are closely tied to the industry. The company is a leading travel retailer with a presence in a wide range of locations including airports and train stations.

JP Morgan recently raised its price target on the group to 1,900p, considerably above the 1,465p it’s trading for today. The bank said that WH Smith was a fundamentally stronger business now than it was before the pandemic and that performance was improving.

It cited three reasons for the upgrade and highlighted “better category opportunities, with the rollout of the ‘one stop Travel shop’ format; better space growth opportunities, with the acquisitions of InMotion/MRG providing both a US rollout story and further expansion into Europe/Asia; [and] better business mix, with a higher [percentage] of group profits coming from Travel.”

This was reflected in WH Smith’s June update. The company said that sales in the 15 weeks to June 11 were up 107% on the same period in 2019, with its travel division surging by 123%.

Some analysts have even suggested the travel chaos may benefit the firm. If flights are cancelled, the shop loses out, but if passengers are transferred to later flights, WH Smith could gain as bored customers look to pass the time by buying £8 Toblerone bars, among other things.

I already own WH Smith stock, but would buy more at the current price.

One of the UK’s oldest retailers

WH Smith is one of the UK’s oldest high street retailers. Its roots date as far back as 1792. As I write, it has over 600 high street locations selling books, stationery, and other convenience items. It also has 600 travel concession locations strategically located at airports, train stations, hospitals, and motorway service stations. WH Smith also has an online presence too.

As I write, shares in WH Smith are trading for 1,670p. A year ago, shares were trading for 1,484p, which is a 12% return. In January 2020, prior to the pandemic and market crash, shares were trading for over 2,500p. It has struggled to return close to these levels over the past 18 months or so. I don’t think it will return to those levels for some time due to inflation, competition, and the supply chain crisis.

Why I’m avoiding WH Smith

WH Smith’s recent preliminary full-year results did not make great reading for me. It reported an overall loss as well as the fact that trading had not returned to pre-pandemic levels. There are other UK shares I am interested in that have confirmed their trading has surpassed 2019 levels.

There are lots of macroeconomic pressures and activity that will affect WH Smith. Firstly, rising inflation will see costs rise and these costs could affect any recovery as well as eat away at margins. Secondly, the UK’s supply chain crisis will affect its retail outlets and store operations. Finally, there is currently a labour supply issue in the UK. For a firm that relies on its large physical store footprint for margins and profit, this is not good news. WH Smith mentioned all these issues in its preliminary results too.

I believe WH Smith’s competitors are better equipped and placed. An example of this is Amazon. If I want a book for example, I instantly think of clicking a few buttons on my smart device of choice and getting it delivered to my door the next day. The rise in technology and ease of online shopping could hamper WH Smith, despite its own online offering.

Despite my bearish stance on WH Smith currently, it does possess some positives, albeit not enough to sway my decision. Its historic roots and track record are not to be ignored. A company that can last as long as it has, adapting to the changing times and society must be applauded. Furthermore, its travel concession locations should benefit from reopening and pent up demand as more travel takes place.

Other UK shares are enticing

Overall, I will avoid WH Smith shares for my portfolio right now. I will keep a keen eye on developments, however.

I believe that other UK shares could offer me better returns. For example, I believe Greggs, the bakery giant, is a good pick and could be an excellent growth play for my portfolio.

Revenue rockets

Today’s results for the full-year to the end of April were certainly nothing for holders to complain about. 

Having despatched over 50 million orders, Moonpig’s revenue rose 113% year-on-year to a little over £368m. According to the company, this was due to growth in new customers and people making more frequent purchases as a result of multiple Covid-19 lockdowns. I certainly count myself within the latter category. 

The good news continues. Adjusted earnings came in at just over £92m — at the top end of guidance issued by the company in February. Pre-tax profit came in only 3% higher than last year but this was due to costs associated with the IPO. 

All this sounds pretty positive. So, why is the Moonpig share price crashing back to earth today? It appears to be down to the company’s outlook. 

To the moon… and back

Despite the new financial year starting “moderately ahead of expectations” thanks to the delay in Boris Johnson’s road map out of lockdown, Moonpig said that it had noticed the number of orders on its site starting to normalise, albeit from “elevated levels“. Importantly, it thinks this drop will continue.

Ultimately, the company expects the frequency of orders to steady around 5% higher than pre-pandemic levels. As a result of this, Moonpig thinks this financial year’s revenue will fall to somewhere between £250m and £260m. That’s clearly a big step down from last year’s headline number. 

Another thing that may be spooking investors is news that management will “continue to prioritise additional investments in marketing and market share capture” rather than focusing on short-term profit. 

Where’s the moat?

There are things I like about Moonpig. In addition to boasting the sort of margins you’d expect from a pureplay online operator, the company’s “unique gifting dataset” should indeed allow it to personalise experiences for customers as management claims.

Speaking as a customer, however, I’m not sure that I would ever buy anything other than cards from the company. It may be adding hugely popular brands like Lego to its range, but a simple online search shows that I can get the same products far cheaper elsewhere. In other words, Moonpig is a convenience play. If I’m organised, I won’t need it. As a potential investor, that would trouble me.

I’m also struggling to find an economic moat here. FTSE 250 peer WH Smith has rival Funky Pigeon in its greetings card arsenal. What would keep me loyal to Moonpig? And will we still be sending greetings cards in, say, 2031 anyway?

No for me… yet

As investments go, I’m torn. While the fall in the Moonpig share price back to near its initial offer price makes it more attractive, I’m not totally convinced the company will grow market share as easily as it thinks.

With this in mind, I wouldn’t feel comfortable buying yet. Expectations have been reduced, but the shares could drift for a while.

Greggs shares: too dear? 

It would seem the UK can’t get enough of its sausage roll fix. Having already said it had seen a big recovery in sales as shops reopened, Greggs announced in June that sales were even better than expected. This could have a “materially positive impact” on full-year numbers. This is significant news considering the company was expecting demand to moderate as more cafes and restaurants opened and shoppers’ enthusiasm (and savings) dropped. 

We’ll get a further update on current trading when Greggs reports its half-year numbers at the beginning of August. Unless the share price gets silly, I doubt I’ll be selling before then. 

Yes, the valuation — at 29 times forecast earnings — is high. In normal times, this is something we might see attached to a promising tech stock. It’s certainly prompted me to question whether a lot of good news is now priced in to Greggs shares. Should it fail to live up to investors’ revised expectations, there could be volatility ahead.

Nonetheless, I remain optimistic. Frequent changes to the rules surrounding foreign travel lead me to think that many of us will throw up our hands and just stay within the UK for another summer. With its presence at motorway service stations and in big cities, this should be good news for Greggs. But even when I factor in the possibility of improving sales from those finally returning to offices, the frothy valuation puts me off buying more now but I don’t think I’ll be taking profits just yet.

“Small improvement”

Of course, Greggs isn’t the only well-known high street name seeming to have turned a corner. Today saw an update from newsagent WH Smith (LSE: SMWH) on trading for the 18 weeks to 3 July. 

It wasn’t too bad. Revenue from its UK high street stores was back to 86% of what it had been over the same period in 2019. Footfall is still below pre-pandemic levels and it’s going to take a while for full confidence to return.

Having said this, revenue at travel sites continues to suffer. Sales at airports, for example, were only at 10% of what they once were. All told, sales in this part of the business were at 62% of 2019 levels.  

Based on trading at Smith’s North America business, however, the worst appears to be over. Revenue here was 74% of 2019 levels over the same 18-week period. However, this jumped to 88% in June as passenger numbers increased. As a result, there’s been “a small improvement to management’s expectations for the current financial year“, although no numbers were given.     

I suspect WH Smith will fully recover, albeit probably not at the same pace as Greggs shares. More Travel stores are planned and it will shortly bring its US tech brand InMotion to UK airports, including London Heathrow.

Nevertheless, I probably wouldn’t rush to buy the stock today, given its greater dependence on international travel getting back to normal. 

Next month, the company will provide investors with final results for its 2019/20 financial year. Now, no one expects the numbers to be good. Indeed, easyJet has already warned that its first-ever annual loss could hit £845m! Nevertheless, the possibility of another lockdown and further travel restrictions could result in more investors deciding to jettison the stock in November.  

The company is doing what it can to mitigate things. Most recently, easyJet reported that it had raised almost £306m through the sale and leaseback of nine Airbus 320 aircraft. This will help shore up the balance sheet but it’s unlikely to be enough. Indeed, the mid-cap has called on the UK government to provide more support to the sector in October.  

Clearly, easyJet shares could do very well in the event of a sudden vaccine breakthrough or reduction in infections. Right now, this looks like wishful thinking. With industry peer IAG warning that passenger numbers won’t recover to pre-coronavirus levels until 2023, the runway to recovery looks long and hard. 

This is not to say that the Luton-based airline is the only company whose owners face a nightmare November. 

Time at the bar?

Holders of JD Wetherspoon (LSE: JDW) may want to look away from the pub chain’s share price when it provides a trading update on the morning of 11 November.

I can’t see the numbers and outlook as being anything but bleak. After all, JD Wetherspoon already announced its first annual pre-tax loss since 1984 earlier this month. The recent introduction of curfews across many parts of the UK is unlikely to have improved the situation. News of the company needing to slash jobs, while not unexpected, doesn’t bode well either. 

Like easyJet shares, the question to ask is how much of this is priced in. At half the price they were at the beginning of 2020, you might think ‘quite a lot’. Moreover, analysts are expecting earnings to rebound massively in FY22, leaving the shares on a P/E of 13 (if you still pay any attention to forecasts). 

Nevertheless, I’d be inclined to look elsewhere, at least until the crucial coronavirus ‘R rate’ is on the retreat. On a risk-reward basis, JDW still doesn’t tempt me. 

Double-whammy

A final share that could face selling pressure next month is high street retailer and travel concession operator WH Smith (LSE: SMWH). The company is due to announce its latest set of full-year numbers on 12 November. 

Before the coronavirus reared its ugly head, it was a quality business generating excellent returns on capital employed. Since then, we’ve had the double-whammy of deserted high streets and a myriad of travel restrictions. The latter is particularly problematic since this was the main growth driver for the FTSE 250 member. 

With Boris Johnson’s fingers hovering over the ‘lockdown’ button, it does feel like things could get worse before they get better. More restrictions would likely have a severe impact on pre-Christmas high-street sales for the company. I wouldn’t like to bet on it being able to compete with the likes of Amazon for online book sales either.

For now, WH Smith is treading water. Next month could see it sink. Now is not the time to be getting involved, I feel. 

UK investors need to remain cautious in this environment. However, some companies on the market could have the potential to double investors’ money from current levels.

Therefore, it may be worth buying a diversified portfolio of these stock market crash bargains to profit from the economic recovery. 

Stock market crash bargains

The coronavirus crisis has particularly severely impacted theatre and cinema owners like Cineworld (LSE: CINE). In the March stock market crash, shares in the company plunged to an all-time low of around 21p.

As the company was forced to close its outlets, revenue vanished, leaving the business with a massive pile of debt and no income. This has left a cloud over the group in the near term. 

Nevertheless, as one of the world’s largest cinema groups, Cineworld may be well-positioned to stage a recovery over the next few months and years. The company has been able to renegotiate lending terms with its creditors and management has also pulled out of a massive deal to acquire Canadian organisation Cineplex. That should help stabilise the balance sheet and allow management to focus on rebuilding the business.

As the company re-opens, there could potentially be substantial returns on the cards for shareholders from the stock market crash casualty. 

Last year the group earned £138m of net profit, or around 10p per share. If earnings return to this level, shares in Cineworld are currently dealing at a P/E of just 4. Historically, the stock has traded at a historical P/E of around 13. That suggests the shares have the potential (for risk-tolerant investors) to jump more than 300% over the next few years as the business re-opens. 

Multi-year recovery 

WH Smith (LSE: SMWH) has also faced a harsh operating environment over the past few months. This was reflected in the company’s price action in the stock market crash. Shares in the retailer plunged by more than 60% in March.

To cope with the crisis, the firm is planning to slash costs, which should help reduce spending while revenues remain depressed. It could take several years for the group’s recovery to take shape.

Analysts don’t expect airline and passenger numbers to return to 2019 levels until 2023. As WH Smith generates most of its sales from concessions in rail and airport transport hubs, this could be a significant headwind. 

Nonetheless, the group’s position in the market is its most considerable advantage, and this isn’t going to go away anytime soon.

Therefore, this stock market crash bargain may have big potential over the next few years. If profits recover to 2019 levels by 2023, the stock may double from current levels.

That’s assuming the company avoids further bolt-on acquisitions, which seems unlikely considering its track record. Additional deals may only speed up the recovery.