1st December 2015
Graham Spooner, investment research analyst at The Share Centre, outlines five companies on his ‘buy’ list that look likely to prosper during the festive season…
ITV will be eager to make your days merry and bright this Christmas with programmes such as Text Santa, Sound of Music Live and the final ever episode of Downton Abbey scheduled in for the festive season. The company, which is one of the UK’s largest broadcasters, is snowballing and has demonstrated through results this year that it is continuing to move in the right direction. Analysts are encouraged by the improvement at its Studios business, with a significant increase in new commissions and its digital offering. Furthermore, the CEO has reiterated recently that he is confident of good growth in 2016. ITV has had to fight hard to maximise its audience share in a fast changing environment. The group has addressed its debt situation which has enabled it to make a number of acquisitions, geared towards boosting its production business.
Marks & Spencer
December is the month where demand for Christmas jumpers, party outfits and gifts is exceptionally high therefore, British retailer Marks and Spencer will be ho ho hoping that it can capitalise. The group continues to see growth within the food business and this is likely to continue over the period, as we all over indulge in turkey, party food and the odd glass of prosecco. Despite a slight drop in general merchandise, margins continue to beat expectations. Investors should also be aware that online sales carry on rising, with a 20% increase in traffic driven by more consumers shopping on tablets and mobile phones. The strength of the growing food business, the significant potential to increase profitability in general merchandise, rising disposable incomes and the healthy dividend means this is one of our favoured companies in this sector.
Food and drink gifts are always a favourite for the most wonderful time of the year, so it is likely that global alcoholic beverages group Diageo could benefit. The company has a wide product range including many well-known brands such as Johnnie Walker, Guinness, Smirnoff, Baileys and Captain Morgan. All tipples that could encourage a bit of rocking around the Christmas tree. Tis the season to be jolly after all. The group has a good geographical diversification with exposure to large, developed markets such as the US as well as fast-growing emerging markets in Asia and Africa. Additionally, Diageo is well placed for increased demand for spirits in the US and the company plans to develop and de-layer the organisation to deliver further operating efficiencies. The strength of its brands, excellent long-term prospects for emerging markets and continued improvements in cost-cutting mean it is a solid investment choice in our eyes.
The supermarkets are fighting for our custom for the sector’s busiest trading period and Sainsbury’s will be hoping to maintain its market share. Its performance is likely to have been enhanced by ‘Mog Mania’ courtesy of the company’s very popular Mog the Cat Christmas advert. As well as selling all the products associated with the Judith Kerr story, Sainsbury’s offers customers a wide range including food, decorations, gifts and seasonal clothing. The group will therefore be hoping that when you’re driving home for Christmas and realise you’ve forgotten that one make or break item, you will pop in to one of its stores and it will be able to accommodate. Investors should note that Sainsbury’s has announced a clearer way of setting and matches prices, as well as lowering prices on thousands of products. Furthermore, the group has teamed up with Danish discounter Netto to open up a number of stores in the UK to help it combat the challenges it is facing from the discount chains Aldi and Lidl. Its balance sheet should put the group in a stronger position over peers to defend its market share.
More and more people are now opting to stay home alone and shop from the comfort of their armchair, rather than brave shopping centres. Consequently, it’s likely that online companies such as Findel could benefit. The multi-channel retailer trades across three divisions, Express Gifts, Kitbag and Education and sells a wide range of products. Whilst the latter divisions have been struggling recently, investors should acknowledge that the Express Gifts division continues to perform well and the group will be hoping for a further seasonal uplift. Findel is expected to see strong earnings growth over at least the next three years, but investors should be aware that whilst a lot of work has been done to stabilise the group, there is still a lot more to do. The company continues to focus on cutting costs and improving distribution channels demonstrating it has potential for further growth.