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DS Smith

What it does:  A provider of sustainable packaging solutions, paper products and recycling services. 

By Paul Summers: Down a third in value in the last year. DS Smith (LSE: SMDS) has given up most of the share price gains it made in the post-pandemic recovery. 

But I wonder if the market has become too bearish. The new financial year has “started well” according to the company and management expects “further substantial improvement in performance” in FY23.

An increase in capital expenditure was never likely to be celebrated but, on a more positive note, the shares now trade at just eight times forecast earnings. 

The dividends look pretty solid, too. DS Smith is forecast to yield 5.7% in the current financial year. This payout should be covered by expected profit if analyst predictions are hit.

As a source of passive income as part of a diversified portfolio, I think the shares are worth a closer look. 

Paul Summers has no position in DS Smith

Clarkson 

What it does: Clarkson provides an array of shipping services such as shipbroking. 

By Royston Wild. Resilient trading at shipbroking giant Clarkson (LSE: CKN) suggests (to me at least) that this remains a top dividend growth stock to buy. 

Cyclical businesses like this face the risk of cooling profits as global growth stalls. But trading conditions at Clarkson remain white hot (it said last month that it expects profits in 2022 to come in “materially ahead of its previous expectations.”). 

Shipping rates remain solid as vessel shortages of all classes roll on. Meanwhile, the war in Eastern Europe has pushed up rates, too, as ships bound for Russian and Ukrainian ports are diverted to already-packed ports elsewhere. This is removing even more capacity as vessels sit waiting to unload their cargoes. 

City analysts think Clarkson’s earnings will soar 22% year-on-year in 2022. And so they are tipping exceptional dividend growth as well, to 92.2p per share. That would represent a 10% year-on-year increase.

This projection creates a healthy 2.7% dividend yield. And the predicted dividend payment is covered 2.3 times by anticipated earnings, too.

Royston Wild does not own shares in Clarkson. 

Hargreaves Lansdown

What it does: Hargreaves Lansdown is the largest provider of retail-focused investment services in the UK.

By Edward Sheldon, CFA. Hargreaves Lansdown (LSE: HL) shares have experienced weakness in 2022 and this has pushed the dividend yield up to a very attractive level. With analysts expecting the group to pay out about 40p in dividends for the year ended 30 June 2022, the prospective yield on offer here is currently around 4.6% – considerably higher than the average FTSE 100 yield.

But this stock isn’t just about dividends. In my view, it has the potential to reward investors with healthy long-term capital gains as well. The reason I’m bullish here is that Hargreaves Lansdown is essentially a play on the world’s stock markets. And markets tend to rise over time.

One risk to consider here is that new competitors are emerging. These companies could potentially steal market share from Hargreaves. However, with the stock currently trading on a P/E ratio of less than 20, I think a lot of this risk is already priced into the stock.

Edward Sheldon owns shares in Hargreaves Lansdown

DS Smith

What it does: DS Smith is the UK’s leading manufacturer of recycled paperboard and corrugated packaging.

By Zaven Boyrazian. With consumer spending declining, e-commerce businesses haven’t had the best time in 2022. Yet, looking at the bigger picture, our current economic environment is ultimately a short-term problem. And online spending continues to grow as a proportion of total retail spending.

That’s why DS Smith (LSE:SMDS) has caught my attention. The cardboard manufacturer doesn’t have an exciting business model. But it does provide a critical product for the e-commerce sector.

With investor confidence at record lows, the stock has dropped by over 37% in the last 12 months. Yet looking at the latest results, sales and profits are up by double digits. But more excitingly, its return on capital employed has jumped from 8.2% to 10.8%, on track to hitting management’s long-term target of 20%.

In other words, despite headwinds, DS Smith is generating impressive growth and value for shareholders. Paring that with a discounted share price spells a buying opportunity for my portfolio, in my opinion.

Zaven Boyrazian does not own shares in DS Smith.

M&G

What it does: M&G is an investment manager that offers savings and investment products across a number of countries.

By Christopher Ruane. For M&G (LSE: MNG), could August be a big month?

I think the answer may be yes. Interim results are due to be released on 11 August. The company’s policy of maintaining or increasing its dividend annually seems to make the shares attractive – if the firm can keep delivering on it.

Last year, the interim dividend rose by 1.7%. But the full year dividend increase was a meagre 0.4%. With a strong brand, long experience and a substantial customer base, the firm has a recipe for profitability. I see the risk of clients withdrawing funds as a threat to profits in coming years. The company reported net inflows of client funds last year. Hopefully that positive trend has continued.

Meanwhile, the dividend yield is 8.4%. So I do not mind if M&G delivers another modest rise or none at all. As long as the firm does not cut its dividend, I think the income opportunity here is attractive.

Christopher Ruane owns shares in M&G.

Ashmore

What it does: Ashmore is an asset management firm that has a presence across the globe and specialises in emerging market investing.

By Andrew Woods. Ashmore (LSE:ASHM) has been consistent with its dividend policy over the past five years. During this time, it has paid well above 16p per share every year. For the year ended June 2021, the firm paid a total dividend of 16.9p per share. At current levels, this equates to a dividend yield of 7.99%. For me, this is appealing.

In the current economic climate, however, customers have generally been more risk-averse, meaning that emerging market investments have suffered. This has been caused by a multitude of factors, including inflation and interest rate hikes. To that end, in June the company’s assets under management declined by 18.3%, quarter on quarter.

However, for the six months to 31 December, the business beat earnings expectations of £89m, instead posting £92m. Furthermore, over the long term the company continues to report consistent growth. Between 2017 and 2021, for instance, pre-tax profit and revenue continue to increase markedly.

Andrew Woods owns shares in Ashmore.

Vesuvius

What it does: Vesuvius makes equipment used in foundries to handle molten metal and control its flow.

By Roland Head. Vesuvius (LSE: VSVS) can trace its history back over 100 years, to the fast-growing US steel industry of the early 20th century.

Today, the company’s product range is broader and more sophisticated. But its core specialism of handling molten metal is unchanged. I think that’s attractive — this business is a market leader in a very specialised market.

Another big attraction for me is that more than 95% of the parts Vesuvius sells are consumables. These need regular replacement.

The only real risk I can see is that customer demand could slow during a severe recession.

I see that as an acceptable risk, especially as Vesuvius is tapping into new growth markets like wind energy.

Management recently reported strong trading and a positive outlook for the rest of the year. Vesuvius shares currently offer a well-supported 6.5% dividend yield. I see this dividend stock as a good buy in August.

Roland Head does not own shares in Vesuvius.

The broader market has sought to disagree, however, and the FTSE 250 firm’s share price has plummeted in the wake of the third-quarter update. It’s now trading at its cheapest for four months.

Much of this summer’s gains may have been wiped out, but I’m not worried. Indeed, I believe Aggreko’s subsequent forward P/E ratio of 15.1 times, in line with the widely-accepted value benchmark of 15 times (or below), makes it a hot buy right now.

Sales surging

In that aforementioned market update, the business — which rents out power generation equipment for a broad range of sectors, from agriculture and energy to shipping and telecoms — declared that underlying revenues galloped 11% higher in the nine months to September.

Growth may have slowed in recent months (comparable sales were up 14% in the first half of 2018), but this result is still not to be sniffed at. That broad operational base protects it from weakness in one or two areas, as does its broad geographic footprint.

Indeed, at its Rental Solutions arm, a division worth more than half of group revenues, underlying turnover soared 26% year-on-year from January to September thanks to soaring sales in North America (up 32%), as well as solid growth in Europe.

Those hoping that Aggreko can break out of its long-running cycle of earnings dips in 2018 are set to be disappointed, or so say City analysts who are forecasting an 8% drop. They are, though, predicting that it will bounce in 2019 with a 6% profits improvement.

And with the profits picture brightening, the number crunchers feel that Aggreko will have the confidence to start lifting dividends again. Last year’s 27.12p per share dividend is expected to rise to 27.5p in 2018 and again to 28p in 2019, figures that yield a chubby 3.7% and 3.8% respectively.

Even bigger yields!

Vesuvius (LSE: VSVS) is another FTSE 250 share offering inflation-busting dividend yields that I’d be happy to buy for 2019 and beyond.

Unlike Aggreko, though, Vesuvius, which manufactures equipment used in the steel and foundry industries, has had no problems lifting dividends in recent times. And thanks to City predictions of further bottom-line growth — earnings rises of 18% for 2018 and 8% for 2019 are currently predicted — shareholder payouts are tipped to keep swelling too.

A 19.5p per share reward is predicted for this year, up from 18p in 2017 and yielding 3.8%. Next year a 20.5p dividend is anticipated, nudging the yield to a tremendous 4%. And I’m tipping payouts to keep striding on along with profits as global steel demand goes from strength to strength.

Right now, Vesuvius trades on a prospective P/E ratio of 10.8 times. This provides a brilliant base for its share price to spring higher in the near-term and beyond, whilst those bulky dividend yields provide a great little bonus. I reckon the engineer is a hot buy today.

Today I’m looking at two FTSE 250 stocks that I believe could power ahead of the FTSE 100 over the coming years.

A turnaround in progress

Back in January, I tipped defence firm Chemring Group (LSE: CHG) as a potential buy. The shares rose by about 30% after that, until a serious fire at its Countermeasures factory in Salisbury caused the shares to crash in mid-August.

The group’s shares fell from 236p to under 195p following this incident, in which one person was killed and one seriously injured. However, Chemring shares have risen by more than 10% already this week, after the firm announced a major new contract win and issued an update on trading.

Work is going to gradually restart at the Salisbury factory, starting with shipments of finished orders. As the factory is rebuilt, it’s likely to be more heavily automated than it was previously. I’d expect this to result in higher profit margins over the long term.

In the meantime, Chemring has won a long-term contract to supply chemical agent detectors to the US Department of Defense. The company says this is the result of several years’ research and development. No information was provided about the value of the deal, but it was enough to send the shares up by 5%. This suggests to me that it’s expected to make a meaningful contribution to future profits.

A buying opportunity?

The fire is expected to cut Chemring’s underlying operating profit by about £15m this year. Aside from this, management says that trading is in line with expectations.

Analysts’ forecasts are for earnings per share to drop by around 18% in 2018, before bouncing back next year. This puts the stock on a 2018 forecast P/E of 20, falling to a P/E of 16 in 2019.  The group’s dividend yield is expected to rise from 1.6% in 2018 to 2% in 2019, as profits and cash flow improve.

I believe Chemring could be a good buy at this level, for long-term investors.

A safer option?

If you’re concerned about investing in a firm that’s facing significant operational disruption, you might want to consider my second choice. FTSE 250 engineer Vesuvius (LSE: VSVS) specialises in “molten metal flow engineering”.

This company makes equipment used in foundries and in the steel industry. The group’s shares have risen by 11% over the last year, compared to a gain of just 2% for the FTSE 100. Although profits dipped in 2015 and 2016, last year saw Vesuvius return to profit growth.

Further progress is expected this year. Analysts expect adjusted earnings to rise by about 15% to 47p per share in 2018. A dividend of 19.3p per share is expected, an increase of 7.2% versus last year’s distribution.

These forecasts put Vesuvius on an undemanding forecast P/E of 13.4, with a prospective dividend yield of 3.1%. In my view this could be a good example of a boring business that makes a good long-term investment. I’d consider buying this stock at current levels.

Under the radar

£3.3bn cap RPC Group (LSE: RPC) specialises in plastic product design and engineering. It’s unlikely to get your pulse racing but that can be a good thing when it comes to investing.

Since breaching £10 back in October, shares in the Rushden-based business had lost roughly 20% in value before today. While nothing can be guaranteed when it comes to the markets, I suspect this morning’s pre-close trading statement for the 2017/18 financial year could help to arrest this fall.

According to the company, trading has continued to be positive since it last updated investors. Full-year revenue is now predicted to have grown “significantly” from that achieved in the previous financial year through a combination of organic growth, the price of polymer, favourable exchange rates and contributions from acquisitions. Profits are likely to be “in line with management expectations“. 

With the impact of plastics very much in focus in recent weeks, RPC commented that it continues to work with its supply chain to “ensure positive outcomes for the environment” and develop products that “can be easily recycled at the end of their life“. The company also said that it looks forward to engaging with the UK Government in light of the latter’s recently-announced Deposit Return Scheme on single-use glass and plastic bottles. 

In other news, RPC confirmed that — through the closure of 22 locations and relocation of 300-odd production lines over three years — the integration of acquisitions Promens, GCS and BPI was now “substantially complete“. It is hoped that the recent purchase of packaging specialist Nordfolien will also support future growth. Acquisitions are “an important part” of RPC’s strategy, according to CEO Pim Vervaat and the company “remains excited by opportunities in the ongoing industry consolidation”.  

With analysts estimating earnings per share growth of 35% before today, RPC’s stock trades on 11 times earnings. Taking into account today’s update, the decent (and likely well-covered) 3.8% dividend yield forecast for 2018/19 and improving free cash flow, that looks pretty good value to me.

Going cheap

Another FTSE 250 constituent that appears to offer good value at the moment is Vesuvius (LSE: VSVS). 

A “global leader in molten metal flow engineering“, the £1.6bn cap released a bullish set of full-year numbers at the start of March, highlighting strong performance “across all regions and business units“.

Thanks to growth in its steel and foundry end markets, underlying revenue rose 12.5% to £1.68bn in 2017 with trading profit climbing 16.1% to just over £165.5m. The latter is the highest achieved since Vesuvius listed on the market.

Having saved £16.2m through restructuring over 2017 — mostly in its Flow Control division — Vesuvius chose to announce another cost-cutting programme on results day, one that would target £15m of annual savings by 2020 in its other businesses.

Right now, you can pick up stock in Vesuvius for 13 times earnings based on analysts forecasts for the full year. Dividends have wobbled in recent years but there’s a 3.2% yield pencilled in for 2018. With free cash flow looking healthy and net debt falling by 14% to £274.3m over the reporting period, I think the stock is worth a closer look.

Unite Students

The Bristol-based group, better known as Unite Students, is the UK’s largest and most established manager and developer of purpose-built student accommodation. It provides a home for around 50,000 of them in more than 140 properties, across 28 leading university cities in England and Scotland. The group works in partnership with more than 60 Higher Education institutions and also lets rooms directly to students.

Manchester has the largest student population in the UK after London with two high quality universities, making it a strong market for Unite Students. The latest announcement builds on the group’s strategy to work in partnership with mid to high-ranking universities, and should be good news for investors, providing further visibility for future earnings growth.

No student discount

Demand for student accommodation has exceeded availability for quite some time, and this shortage isn’t going to evaporate any time soon. It’s no surprise then that Unite’s shares have been in high demand, soaring by almost 30% over the past 12 months.

So no student discount here I’m afraid, as the shares now look fully valued at 24 times 2017 earnings. However, I continue to view the FTSE 250 group as an exciting long-term growth play, and would wait patiently for any share price correction or pull-back, and be ready to buy on weakness.

Molton flow engineering

For those who can’t wait to spend that hard-earned cash, then perhaps a more timely growth opportunity comes in the form of Vesuvius (LSE: VSVS). Not only does the business have an awe-inspiring name, but over the last couple of years it has also delivered for its shareholders, with its share price soaring from lows of 271p in early 2016, to recent highs of 606p. But I think the shares are worth more.

The FTSE 250-listed business is a global leader in molten metal flow engineering, principally serving the steel and foundry industries, developing innovative and customised solutions, often used in extremely demanding industrial environments.

Shares explode

During the first half of 2017, Vesuvius benefitted from the 4.5% year-on-year growth in global steel production, as reported by the World Steel Association. At the same time, the group continued to make further progress with its restructuring programme, where annual savings targets have now increased by £15m to a total of £55m.

Vesuvius’s share price has exploded over the past couple of years, with its shares doubling in value since the start of last year, and yet strong forecasts for growth mean that it trades on an undemanding forward price-to-earnings ratio of 16.

AstraZeneca (LSE: AZN) has experienced a difficult month, with its shares falling 16% following a disappointing update on 27th July. A clinical trial of a key lung cancer drug failed to deliver positive results, and investor sentiment is now weaker.

This could present a buying opportunity for the long term. AstraZeneca still has a robust and improving pipeline, which could deliver improving profitability in future years. With a strong balance sheet and resilient cash flow, it could engage in further M&A activity to boost its outlook. A dividend yield of 4.9% and a P/E of 15 suggest it offers value and income appeal right now.

Peter Stephens owns shares in AstraZeneca

Ian Pierce: Equiniti

Equiniti (LSE: EQN) is far from a household name but, as the company provides share registration services for half of the FTSE 100 and manages more than 20 million shareholder accounts, most investors probably use it indirectly. Alongside share registration, the group provides companies with other mission-critical but non-core services such as compliance and risk management software.

The stickiness of these services leads to around 50% of revenue being recurring as well as pricing power that is evident in the company’s 24.2% EBITDA margins posted last year. And with expansion into the US kicking off with a large £176m acquisition, Equiniti’s shares look attractively valued to me at 12 times trailing earnings.  

Ian Pierce has no position in Equiniti. 

Harvey Jones: Tritax Big Box REIT

The specialist property sector is booming, delivering four of the top five fastest-growing investment trust launches of the last five years, according to the Association of Investment Companies.

Tritax Big Box (LSE: BBOX) has grown fastest of all, posting an impressive 979% increase in assets under management since launch in December 2013. So far this real estate investment trust (REIT) has given investors a total return of 64%.

Recent acquisitions include the National Distribution Centre at Trax Park, Doncaster, for £20.9m in May, and the Littlebrook Power Station, Dartford, in July for £65m, where the REIT plans to build one of the largest Big Box logistics parks inside the M25.

The trust yields 5.73% but some may wish to wait until the premium of 14.83 narrows.

Harvey Jones has no position in Tritax Big Box REIT.

Royston Wild: Taylor Wimpey

I reckon Taylor Wimpey (LSE: TW) should add to the recent collection of confident trading statements from Britain’s housebuilders in August.

Interims are pencilled in for Tuesday August 1st, and I am confident of another perky report following spring’s encouraging update. Private net reservations at Taylor Wimpey jumped 16% during January 1st to April 27th, the company citing “positive customer demand and good mortgage availability,” while its order book increased to 9,219 homes from 8,811 a year earlier.

The stock’s ultra-low valuations certainly leave plenty of scope for a fresh share price spurt. A predicted 2% earnings rise in 2017 creates a forward P/E ratio of just 10.1 times. And a monster 7.1% yield adds extra incentive for investors to pile in.

Royston Wild owns shares in Taylor Wimpey.

Roland Head: Persimmon

FTSE 100 housebuilder Persimmon (LSE: PSN) generated £343m of surplus cash in 2016, comfortably covering its next planned capital return of 110p per share. The firm’s earnings are expected to rise by 12% in 2017, as housing demand remains strong. Sales rose by 12% to £1.66bn during the first half of 2017, during which the group generated another £207m of surplus cash. 

Persimmon shares are now worth double their 2007 high. But a price/free cash flow ratio of 11 and a forecast yield of 5.2% means this stock still looks affordable to me. With interim results due on 22 August, I believe further gains are possible.

Roland does not own shares of Persimmon.

Paul Summers: Bango

I think mobile payment platform provider Bango (LSE: BGO) is a very interesting proposition for risk-tolerant, patient investors. Clients of the £180m cap already include tech giants Google, Microsoft, Samsung and Amazon.

In its most recent update, Bango revealed that annualised end user spend (EUS) at the end of June exceeded £300m a year — over 50% higher than that achieved six months before.  A proportion of this was driven by the launch of Direct Carrier Billing for Amazon in Japan. The company is now firmly on track to hit its target of doubling this figure by December 2017.

While the stock’s already up over 200% in the last 12 months, I think this positive momentum could continue in anticipation of mid-September’s interim results.

Paul Summers has no position in Bango.

Edward Sheldon: WPP

Recent share price weakness in advertising giant WPP (LSE: WPP) has presented an attractive entry point, in my opinion. The shares have slumped from 1,920p to 1,550p over the last five months, on the back of a cautious short-term outlook from the company in March, and both a cyber attack and a downgrade from broker Exane BNP Paribas in June.

However, for those with a long-term mindset, I believe the share price drop has created an opportunity. Earnings per share are forecast to rise 11% this year to 126p, meaning that at the current share price, WPP now trades on a forward looking P/E ratio of just 12.3. Furthermore, the stock now looks particularly attractive from a dividend investing point of view, with the forward looking dividend yield currently above 4%.

Edward Sheldon owns shares in WPP.

Rupert Hargreaves: Vesuvius

Molten metal flow engineering might not sound like the most exciting business around, but it’s a highly lucrative business for Vesuvius (LSE: VSVS). After several years of stagnant growth, City analysts are expecting the firm to report earnings per share growth of 20% this year, followed by growth of 12% for 2018. Results from the company at the end of July confirmed that it is on track to hit this target thanks to a buoyant global steel market.

Based on City growth projections, shares in Vesuvius look undervalued, trading at a forward P/E of 16.5 and PEG ratio of 0.8. As well as offering growth at a reasonable price, Vesuvius supports a dividend yield of 2.9%, and the payout is covered twice by earnings per share.

Rupert does not own shares in Vesuvius. 

Bilaal Mohamed: Crest Nicholson

My top stock for August is residential property developer Crest Nicholson (LSE: CRST). The Surrey-based housebuilder remains committed to increasing its shareholder rewards, with dividends swelling from just 6.5p per share in 2013 to last year’s huge full-year payout of 27.6p. City analysts are expecting this year’s payouts to go even further, with consensus estimates suggesting a total dividend of 34.03p per share for the full year, resulting in a massive prospective yield of 6.3%.

In recent months the FTSE 250-listed business has seen its share price retreat from May’s all-time highs of 636.5p, but I believe this is just a temporary retracement, and expect to see a continuation of the upward surge that has led to the shares doubling in value in less than five years. With earnings predicted to rise by 21% by the end of fiscal 2018, I believe a P/E rating of eight is simply far too cheap for this rapidly growing business.

Bilaal has no position in any shares mentioned.

Alan Oscroft: Unilever

For years I’ve been eschewing Unilever (LSE: ULVR) shares as perpetually overpriced, with dividend yields in the 3-4% range not really looking good enough to offset P/E multiples of around 20.

But looking back over the company recently, it’s struck me that I’ve been a chump all that time. Over five years, the share price has risen by 87% (on top of those healthy dividends), and that’s trounced the FTSE 100. And over 10 years, we’re looking at a 180% gain (compared to the FTSE’s meagre 18%), and a climb of 1,300% since 1988.

Next time you sip Lipton tea, refresh yourself with Dove soap, or pour Persil into your washing machine, think about how many millions around the world are doing exactly the same thing. 

Will I be reconsidering Unilever when I next evaluate my SIPP and ISA investments? You bet I will.

Alan Oscroft does not own shares in Unilever.

G A Chester: Randgold Resources
 
Gold stocks can thrive when uncertainty or fear sends other equities tumbling. Having exposure to the sector can mitigate a portfolio’s plunge into the red. There’s also potential to take profit on the soaring gold stock and recycle it into bashed-up bargains.
 
Randgold Resources (LSE: RRS) is a good choice for gold exposure, in my view. It’s the sector heavyweight and, unlike the metal itself and many smaller miners, offers a handy 2% dividend yield. As the shares are well below last year’s post-Brexit-vote high of over £90, I think now could be a good time to buy a few.
 
G A Chester has no position in Randgold Resources.

Jack Tang: Persimmon

Shares in housebuilder Persimmon (LSE: PSN) have done exceptionally well in the last few months and, in my view, they could still be a great addition for investors looking for growth at a reasonable price.

Its last trading update was very encouraging, as the company reported continued growth in completion volumes and a steady improvement in average selling prices. Revenue in the first-half grew by 12% to reach £1.66bn, with the housebuilder set to release more details on its first-half performance on 22 August.

Despite a year-to-date gain of 41%, shares in Persimmon are valued at just 10.8 times expected earnings this year.

Jack Tang has no position in Persimmon.

Kevin Godbold: B&M European Value Retail

While I tipped the same stock for April, I firmly believe an attractive offering and inflation-squeezed consumer incomes drive customers to B&M European Value Retail SA’s (LSE: BME) estate of 500 or so UK stores, leading to robust growth in revenue, cash inflow and earnings.

The recent full-year report revealed raised expansion plans from a target of 850 UK stores to 950, suggesting a positive trading outlook. Like-for-like gains and a strong pipeline of 40-50 new stores planned for the UK for the remainder of 2017, and 15 in Germany, look set to drive growth. Recent vibrant trading and these increased growth expectations make me optimistic regarding shareholder returns for June onwards.

Kevin owns shares in B&M Value Retail SA.

Royston Wild: BAE Systems

The possibility of intensifying political intrigue in June encourages me to believe that BAE Systems (LSE: BA) could continue to power forwards in the weeks ahead.The saga surrounding the Trump presidency shows no signs of slowing and is likely to keep the defence sector well bought. And on the other side of the Atlantic, anything other than a crushing Tory majority at next week’s general election could see safe-haven stocks surge. A predicted 8% earnings rise in 2017 leaves BAE Systems dealing on a P/E ratio of 15.3 times, just above the FTSE 100 average of 15 times. And in my opinion, this leaves plenty of scope for a fresh ascent.

Royston Wild has no position in BAE Systems.

Rupert Hargreaves: Burford Capital

The provision of arbitration and litigation finance may not seem like the most exciting business, but it is certainly a highly profitable one, as shareholders in Burford Capital (LSE: BUR) have discovered over the past four years. 

Since 2013, Burford’s pre-tax profit has exploded over 4,000% from £2.2m to £104m — and City analysts are predicting further growth this year, pencilling in a pre-tax profit of £110m and earnings per share of 49p, up 19% year-on-year. 

Over the past five years shares in Burford have returned 700%, and as the company’s growth continues, it looks as if shares in Burford can continue to head higher. Even though the shares currently trade at a forward P/E of 17.3, I believe this is a premium multiple worth paying for such a fast growing business.

Rupert does not own shares in Burford Capital. 

Ian Pierce: Experian

This month I’m once again drawn to take a closer look at credit check behemoth Experian (LSE: EXPN), the defensive favourite with reliable non-cylical revenue and a very wide moat to entry for competitors. 

Yet Experian is more than a low growth defensive as it also offers huge growth potential thanks to its large Brazilian business that is growing by leaps and bounds, as consumers there increasingly use credit just as often as consumers in the UK or US.

With its shares priced attractively at around 20 times forward earnings while offering big shareholder returns and future growth, Experian is one stock I’d love to own for the long term.

Ian Pierce has no position in Experian. 

Alan Oscroft: Renewi

The turnaround that seems on the cards for waste management specialist Renewi (LSE: RWI) has made me sit up and take notice this month, after a year the company described as “transformational”.

There’s been some hefty restructuring and a rights issue at the firm previously known as Shanks Group, and it’s led to cracking growth forecasts coupled with a better-than-average (and rising) dividend. 

With a modest P/E of 12 for March 2019 and a PEG ratio of just 0.2, along with a forecast 3.7% dividend yield, at around 95p Renewi looks like a tasty recovery prospect to me.

Alan Oscroft has no position in Renewi.

Edward Sheldon: Saga

My top stock for June is ​Saga​ (LSE: SAGA) and there’s several reasons I like the stock.

First, as a service provider for the over-50s, I reckon demand for Saga’s products should remain strong in coming years due to the UK’s ageing population. Second, the stock looks to have excellent dividend potential, with FY2017’s payout of 8.5p equating to a yield of 4.2% at the current share price, and this is forecast to grow 9% next year. Dividend coverage of 1.66 times suggests the dividend is sustainable. Lastly, on a forward looking P/E of 14, Saga looks to offer reasonable value at present, despite the strong run the FTSE 350 index has enjoyed recently.

Edward Sheldon has no position in Saga.

Jack Tang: Sage Group

Sage Group (LSE: SGE) might not appear cheap with shares trading at 25.8 times trailing earnings, but there are many reasons why investors are prepared to pay a premium for the company. First of all, the business software company is on a solid footing as it is making steady progress with the transition from one-off software sales to subscriptions.

May’s encouraging trading update showed continued momentum in new customer acquisitions, with management expecting further growth to come in the second half of 2017. City analysts are also bullish, with consensus forecasts calling for underlying earnings growth of 16% this year, with a further increase of 7% in the following year. And based on these estimates, Sage seems fairly valued to me, with shares trading at 20.2 times its expected 2018 earnings.

Jack Tang has no position in Sage Group.

Bilaal Mohamed: The Gym Group

My top stock for June is low-cost gym operator The Gym Group (LSE: GYM). The Guildford-based health & fitness group has to date been very successful with its disruptive business model, allowing its members to use its facilities on a pay-as-you-go basis, without paying a premium or being tied into a contract. By the end of 2016 membership had grown to over 448,000, a 19.1% increase on the previous year, helping the group to achieve a 22.6% rise in full-year revenues to £73.5m, and swing to a pre-tax profit of £6.9m.

I think there’s plenty more to come from this rapidly expanding chain, with 15 new sites added last year, bringing the total to 89, and a further 15-20 new openings earmarked for 2017. The shares may look expensive at 26 times forecast earnings, but this falls to 22 times next year, and in my view is not too demanding given the prospects for future growth.

Bilaal has no position in The Gym Group.

G A Chester: Vectura

Shares of respiratory drugs and devices specialist Vectura (LSE: VEC) have fallen over 25% since March. A large part of this has come since an approval delay for a generic version of GlaxoSmithKline‘s Advair Diskus asthma drug. This is somewhat disappointing but Vectura and its FTSE 100 partner Hikma Pharmaceuticals are confident approval will be given in due course.

More importantly, Vectura has become a major player in its field since merging with fellow FTSE 250 firm Skyepharma this time last year. I believe the current depressed share price represents a great opportunity to buy into a compelling long-term growth story.

G A Chester has no position in Vectura or Hikma.

Roland Head: Vesuvius

FTSE 250 manufacturing group Vesuvius (LSE: VSVS) makes systems used to handle molten metal in steel works and foundries. Demand for the firm’s specialist products appears to be improving, and the company recently reported “a strong Q1 2017”.

City analysts have turned increasingly bullish on Vesuvius over the last three months. Adjusted earnings per share are now expected to rise by 20% to 36.3p this year, putting the stock on a forecast P/E of 16, with a prospective yield of 3%.

Institutional buying following these upgrades could drive the shares higher. I’d rate Vesuvius as a buy at current levels.

Roland does not own shares of Vesuvius.

Paul Summers: XP Power

My pick for June would be critical power control component developer XP Power (LSE: XPP). Back in April’s trading update, the company stated that positive momentum seen in the second half of 2016 had continued into 2017. Group revenues and order intake in Q1 were up 23% and 36% respectively on the previous year (in constant currency).

XP Power has a robust balance sheet (£8.8m net cash position at the end of March), enviable free cashflow, a history of stellar returns on capital and high operating margins. At 22 times forward earnings, it’s certainly not cheap to buy but I suspect that the shares will continue to perform strongly over the coming weeks in expectation of further good news when the company announces interim results in late July.

Paul Summers has no position in XP Power

Red hot

It has been a good day for Vesuvius (LSE: VSVS), a global leader in molten metal flow engineering, whose share price is up almost 9% after this morning’s trading update. This caps a good year for the group, whose share price has nearly doubled from 331p to 590p over the last 12 months.

Vesuvius has benefitted from encouraging signs of improvement in the global steel market, a trend that has driven a strong first quarter in 2017, making up for a relatively weak final quarter last year. Management recognises that these are early days and warns that predicting market resilience is never easy, but assured markets that it was “cautiously optimistic” about its 2017 trading performance.

Ready to blow

Vesuvius has been helped by 5.7% year-on-year growth in global steel production, as reported by the World Steel Association. However, this starts from the relatively low baseline of Q1 2016, and full-year 2017 growth expectations will be materially lower than this figure. Management is also concerned about specific markets, with demand for light vehicles slowing in the US, and heavy truck and mining sales showing only slight signs of recovery.

The firm continues to seek out restructuring opportunities, with total targeted savings of £45m a year. It has also benefitted from sterling weakness, although that may now reverse. The outlook is bright, with forecast earnings per share (EPS) growth of 12% this year and 10% in 2018. This is available at an undemanding forecast valuation of 15.4 times earnings. However, revenues look set to rise only slowly, so much of this is down to cost-cutting. A 3% yield covered 1.8 times is solid but not spectacular. Markets evidently like what they heard today and Vesuvius looks set to keep bubbling along nicely, providing the global economy does.

Defensive play

Meggitt (LSE: MGGT) has been hitting the highs lately, its share price rising 20% in the past year alone, of which 12% came in the last three months. However it still looks affordable, trading at just 13.81 times earnings.

The group, which specialises in high performance components and sub-systems for the aerospace, defence and energy markets, was given extra lift-off after reporting revenue growth of 9% last month. It was boosted by weaker sterling, which beefed up the value of its overseas earnings. Civil aerospace, organic aftermarket revenues and original equipment revenues all grew 3% organically, although military revenues declined 5%, and energy revenues also declined.

Trump play

The future looks steady, with anticipated 2%-4% organic revenue growth for the year, in line with guidance issued in February. The outlook for its military division should also be brighter, assuming that President Trump gets at least some of his spending package through Congress.

EPS are forecast to rise a steady 7% this calendar year and 5% in 2018. These steady growth prospects are yours for an attractive forward valuation of just 12.4 times earnings, while the forecast yield of 3.3% is handily covered 2.3 times, suggesting room for progression. I’m hoping that Meggit will fly to new heights.

Something is going right

If the firm’s customers are easily won over by cheaper competing products, as frequent references to ‘competition’ in the recent full-year results suggest, how likely is it that any of Stock’s brands will emerge as premier market-beating sellers across the world? Unlikely, I would suggest, but we should nonetheless keep alert to gathering strength in the company’s brands such as Stock, 1906, Amundsen, Keglevich, Saska, Silver and Boskov.

Stock Spirit’s stated goal is to become Central and Eastern Europe’s leading spirits business, and something is going right because the shares are up around 68% since December 2015. At today’s 175p share price, the forward dividend yield for 2018 runs at 3.5% or so. City analysts following the firm expect earnings to lift 9% during 2017 and 5% in 2018 and to cover the dividend payout around twice.

So, Stock has share-price momentum, growth and a reasonable dividend yield. On top of that, there is always the possibility that one or several of the firm’s brands could gain strength and popularity — perhaps enough to support higher profit margins and a campaign of international expansion.

I think Stock Spirits is an interesting investment proposition and you can pick the shares up on a reasonable-looking forward price-to-earnings (P/E) ratio of just over 14 for 2018.

Restructuring driving growth

I reckon operations must be cyclical at Vesuvius (LSE: VSVS), which serves the steel and foundry industries dealing in molten metal flow engineering solutions for demanding industrial environments. The firm aims to help its customers improve their manufacturing processes, enhance product quality and reduce energy consumption by supplying flow control solutions, advanced refractories and other consumable products, as well as related technical services and data capture.

The company’s offering is embedded in the industrial environment and I don’t think the firm’s customers will invest as much into Vesuvius’s products and services when economic times are tough. In the full-year results statement delivered in March, chief executive Francois Wanecq described market conditions as “challenging” during 2016. However, a restructuring programme drove a return to growth in sales, and City analysts following the firm expect earnings to lift 12% during 2017 and 10% in 2018.

Good momentum

The share price is responding well — up almost 90% since the beginning of 2016 — and it’s hard to ignore the firm’s operational and share-price momentum, which looks set to continue, at least in the short-to-medium term.

If you hop aboard the story today you’ll receive a forward dividend yield running around 3.4% for 2018 with the payout covered just over twice by those forward earnings. At today’s 525p share price, the forward P/E ratio runs at a little over 14 – almost identical to Stock’s — so these two interesting firms make a good comparison. Which do you prefer?

Encouraging results

The company in question is molten metal flow engineering specialist Vesuvius (LSE: VSVS). Its shares moved as much as 18% higher on Thursday following its results. They showed that the company is making encouraging progress with its restructuring. It recorded benefits from those changes of £16.6m in 2016 and is targeting savings of a further £35m by the end of 2017. Its performance during the year was resilient and saw the company make progress in its long-term, structural growth markets of China, India and Brazil.

Vesuvius recorded a fall in revenue of 4% and a decline in trading profit of 1.5%. However, investors were more interested in its strategy update, with its improving cash flow and growth in return on sales improving sentiment in the short run. And since the company is confident in its near-term outlook, further share price gains cannot be ruled out over the coming weeks.

Valuation

However in the medium term, the company’s share price could fall significantly. It trades on a growth stock valuation, but appears to be anything but. For example, Vesuvius has a price-to-earnings (P/E) ratio of 21, which indicates that its shares are overvalued. Certainly, it is forecast to record a rise in its bottom line of 13% in 2017 and 7% in 2015, however this equates to a price-to-earnings growth (PEG) ratio of over two. This suggests a share price fall could be ahead, rather than further capital gains.

Sector value

Of course, the general industrials sector to which Vesuvius belongs can command high valuations. The companies within the sector often offer global exposure and their long-term growth rates can be significantly above average. At the present time, they are also set to benefit from weaker sterling, which could add several percentage points to their growth rates.

However operating within the same industrial sector as Vesuvius is DS Smith (LSE: SMDS). It trades on a relatively low P/E ratio of just 14.3 and is forecast to record a rise in its bottom line of 7% next year and 6% the year after. This indicates that there is upward re-rating potential on offer, since the company appears to have a sound growth strategy.

Its focus on packaging also means it has a relatively stable earnings outlook, as evidenced by its double-digit earnings growth in each of the last four years. Therefore, while sector peer Vesuvius may be a stock to avoid, DS Smith could be a stunning growth opportunity for the long run.