Nick Raynor, investment adviser at The Share Centre, takes a look at opportunities not to miss out on over the summer.
Asos – higher risk
This rags to riches story started in earnest in 2003; the share price was trading at just 3p but thanks to the internet and an increasing desire by the youth of today to dress like their idols, the share price since then has been on the up and up. July saw yet another superb set of figures from ASOS and we expect this to continue as holiday makers look for those last minute summer outfits and swimwear.
The trading update issued saw revenues rise 69% compared to the same period last year, UK sales were improved but it was the International sales that really impressed. International expansion and less reliance on the UK market is an important step. The target is for sales to reach £1bn by 2015: at this rate it will be sooner.
We recommend investors continue to buy, however current shareholders may wish to consider taking some of the vast profits they should have made if bought on our initial recommendation in June 2010.
Marston’s – higher risk
The summer months tend to lend themselves enjoying the sunshine in pub gardens and Marston’s will be hoping to profit from this.
In the period to 23 July Marston’s continued to make sound progress and profits were ahead of expectations. The company continues to focus on being family friendly and increasing the importance of food in an effort to maintain this growth in difficult trading conditions. It seems to be working as Marston’s reported overall sales growth of 2% whilst its competitors have all seen sales slow over the same period.
This is a higher risk recovery stock, with an attractive prospective yield of over 5% that may be of interest to income seeking investors. The company appears to be performing well, however growth seeking investors will need to be patient as it has been swimming against the tide of economic and sector concerns and management remains cautious on the outlook.
Tesco – lower risk
Despite its vast size, supermarket giant Tesco remains one of the most dynamic companies in British retailing. Its success is down to a consistent strategy well executed, concentrating on keeping prices down, margins steady and extending range and volume.
The strength of the company is its attractive international earnings, good cash flow and the potential for sustainable growth. Rapid expansion in China is set to continue and mortgages will be sold in the first half of 2011 in the UK, followed by current accounts in 2012.
There are still uncertainties in the sector, however if any supermarket is to benefit from the warmer months we would expect it to be Tesco. It is the one stop shop for all summer goods, from garden furniture to BBQ food and can also benefit from back to school promotions.
Although Tesco’s core business is in the UK, international earnings are a key factor to the company’s strength and this is attractive for investors. Tesco remains our preferred play and we continue to recommend investors ‘buy’ into any weakness in the share price for the long term.
GlaxoSmithKline – lower risk
The summer months cause discomfort to hayfever suffers and GlaxoSmithKline will hope those looking for relief will buy its brands over its competitors.
The company has managed to pull back previous high declines in earnings as revenue fell just 4% and if you strip out the effects of declines in sales of Avandia and Valtrex, then it would have seen a 5% rise. Emerging markets also played a major part in the success of the quarter, with sales rising 13% in the area.
The yield is attractive at almost 5% and the growth story looks to be improving. We continue to recommend investors ‘buy’ for stability in a portfolio.
Diageo – medium risk
Diageo will be looking to profit from the summer months as people take more advantage of Pimm’s O’Clock in the warmer weather. The company will also hope to benefit from people drinking its brands at summer events and the Rugby World cup.
Emerging markets are the company’s strength as it continues to see growth in these regions as they majorly increase marketing spend. Growth in Europe has been negative; however this was very much overshadowed by recent overall sales growth of 9% in Asia.
International Consolidated Airlines Group – medium risk
International Consolidated Airlines Group was formed by the merger of British Airways and Iberia Airlines. The company saw an upswing in passenger traffic in June, driven by growth in its long-haul premium segment and this should continue through the summer months.
The airline said group traffic, which is measured in revenue passenger kilometres, rose by 9.2%, while capacity, measured in available seat kilometres, was up by 6.8%.
However, this strong improvement in performance was due to depressed figure last year caused by the disruption at British Airways and the network restructuring in Iberia Airlines.
We believe that the picture will continue to improve for International Consolidated Airline Group and it is well worth a closer look from investors seeking growth.