Adding to your buy list? Five summer stock picks to consider
The popularity of cruises continues to increase as holidaymakers become more adventurous. As a result the largest cruise company in the world Carnival, whose fleet includes a total of 100 ships and 212,000 berths, could benefit. It’s been an historic year for the group as one of its cruise ships was the first to sail from the United States to Cuba in more than 50 years. This is the result of improving relations between the US and Cuba, which could lead to a lifting of the long-running trade embargo and boost demand for cruises in the Caribbean.
Investors should appreciate that the group has made a strong start to 2016, with net income almost doubling in the first quarter. Furthermore, earnings are expected to grow by 70% over the next three years, which is very fast for a company of Carnival’s size.
We recently upgraded the company to a ‘buy’ and suggest it would be suitable for medium risk investors with a balanced portfolio.
Marks & Spencer
Forecasters are suggesting that the UK could experience the hottest summer in more than a century this year. This news can only bring music to the ears of those at Marks and Spencer. The group is undergoing a lot of change under new CEO Steve Rowe, who has vowed to revive sales, particularly in the underperforming general merchandise division.
Investors should appreciate that the food division is strong and continues to grow, with the company offering an extensive range of BBQ food items as well as a new picnic ware range. Moreover, the group could benefit from being suppliers of the England football team’s official suit ahead of the European Championships this summer. Although the group’s restructuring will take some time to work, Marks and Spencer’s healthy dividend is a key attraction for income investors. It is well covered and forecast to grow above inflation over the next few years.
On those hopefully occasional rainy days, Sky will be on hand to offer viewers a summer of incredible sporting television. The company is scheduled to broadcast huge events such as Formula 1, International Test Cricket, International Rugby Union, The Open Golf Championship and the start of the 2016/2017 Premiership season, amongst many other things. As a result of 2014’s expansion into Europe, with the purchase of assets in Germany and Italy, the group now has over 21.7m customers.
Investors should appreciate that Sky continues to invest in its range of media products and programme content, along with other initiatives aimed at continuing the group’s growth. These include SkyQ, mobile phone launch and Sky HD in Germany. The company has had to dig deep to keep the right to broadcast the majority of football matches since the emergence of BT, however, its ability to win new customers and more importantly, to upgrade to a single package, along with the expansion of product, leads us to believe that the share price could again start to head in the right direction.
TUI is the largest tourism group in the world with six airlines, 300 hotels, 12 cruise ships and 77,000 employees. The company’s brands include the likes of First Choice, Thomson, and Airtours,so it is likely to benefit as Brits jet off around the world for a week of sun, sea and cocktails! TUI recently reported a rise in first half revenue, with the numbers boosted by €15m in synergies from the 2014 merger of TUI with its German parent company and good growth in its cruise business. Investors should appreciate that the group continues to forecast a 10% rise in full year earnings. The improving economic backdrop in the UK, growing success of the unique holiday offerings, long-term benefits of the merger and reducing competition in the sector means this is an attractive investment idea for investors seeking a balance of income and growth.
We have already outlined the numerous sporting events happening this summer without even touching on the two biggest, the Euros and the 2016 Olympic Games. With all of these events taking place, bookmaker William Hill will be hoping to make a killing over the summer months. The group has already started a promotion to tempt punters in offering a £5 free bet, every time England win a match when they bet £10 on them to win the tournament.
Although the company has stated the first half of the year has been tough, the group believes it will meet its full year profit guidance and its overseas operations remain strong. The company provides diversification and continues to expand its services to appeal to a wider demographic and is a suitable investment idea for higher risk investors.
Ian Forrest is investment research analyst at The Share Centre