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Every month, we ask our freelance writers to share their top value stock ideas with investors – here’s what they said in December!
[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]B&M for European Value Retail
What it does: B&M operates a chain of discount stores selling groceries and general merchandise in the UK and France.
Written by Roland Head. Profit growth decreased by B&M for European Value Retail (LSE: BME) since the pandemic. But the business is still growing and is more profitable than any of the UK supermarkets.
Sales rose 70% to £5.6bn from 2019, while operating profit rose 78% to £568m over the same period.
Shareholders have benefited from a series of dividend payouts and these payouts are expected to continue. Consensus forecasts suggest a payout of 23.8p per share this year, giving a yield of around 6.9%.
Another risk is that longtime Trading Director Bobby Arora will retire next year. He is the mastermind behind B&M’s ever-changing stock and pricing, but leaves an experienced team behind. I don’t expect much to change.
B&M’s recent price slide has left the stock trading at nine times earnings. I think that looks cheap for a business of this quality.
Roland Head has no shares in B&M European Value Retail.
Prudential
What it does: Prudential is an insurance and property company operating exclusively in Asia and Africa.
Written by Andrew Mackie. Buying something low and selling it for a profit in future years sounds easy, but in the long run many private investors do the exact opposite. Take a company like Prudential (LSE: PRU). After the widespread narrative that China (its largest market) has become “uninvestable”, its share price finds itself at levels not seen since 2012.
China’s economy may be in crisis, but the business posted very respectable H1 results in August. Its new business profit grew by 8%. This was very good considering that at the same time in 2023, business was booming following the re-opening of the border between Hong Kong and mainland China. After a strong set of results, it’s no wonder it raised its dividend by 9%.
But it’s the long-term growth story that I always focus on. With single-digit life insurance entry rates and limited pension and health care coverage, it is unlikely to sit well with the growing middle class.
Andrew Mackie is a Prudential shareholder.
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