Top British stocks for September

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We asked our freelance writers to share the top British stocks they’d buy this September. Here’s what they chose:

Tom Rodgers: Carr’s Group

When I’m picking shares, I try to find undervalued or unappreciated companies that don’t win a lot of headlines. That’s why Carr’s Group (LSE:CARR) has pinged my radar.

Shares in the £146m agricultural and engineering business are up only 20% in the last 12 months, but the firm said in a July trading update that “order books have grown significantly” in the financial year, with higher dividends, strong cash flows and new wins in nuclear and defence. Today’s price-to-earnings (P/E) ratio of 13 looks materially undervalued to me, given the profits and net cash on offer. 

Tom Rodgers has no current position in Carr’s Group

Rupert Hargreaves: Marston’s

As the UK economy reopens, hospitality businesses such as Marston’s (LSE: MARS) are recording brisk trading.

However, the market still seems to be wary of investing in these businesses. I think this offers an attractive opportunity. Marston’s latest trading update reported that sales were 90% of 2019 levels between 12 April and 24 July. Despite this recovery, the stock is dealing 25% below its year-end 2019 price.

Of course, while sales have recovered, the firm is not out of the woods yet. Another coronavirus lockdown could send the business back to square one. Higher costs may also weigh on Marston’s growth.

Despite these risks, I’d buy this top stock in September for its recovery potential.

Rupert Hargreaves does not own shares in Marston’s.

Roland Head: Marks & Spencer

I’m feeling increasingly excited about the prospects for retailer Marks & Spencer Group (LSE: MKS). CEO Steve Rowe is prioritising food and online sales, while slimming down the store estate.

M&S’s latest numbers suggest these changes may be working. Online sales of clothing and home products rose by 53.9% last year, partly offsetting the effect of store closures. Food sales were up 6.9%, on an underlying like-for-like basis.

My main worry is that debt remains a little higher than I’d like. But borrowings are falling. With M&S stock trading on just 10 times forecast earnings, I can see value.

Roland Head has no position in any of the shares mentioned.

Zaven Boyrazian: Savills

With lockdown and travel restrictions starting to ease, Savills (LSE:SVS) is seeing a surge in buying activity from its customers. The high-end real-estate business caters to the world’s wealthiest individuals.

Over the last six months, the average selling price of Savills luxury properties was £1.9m. Thanks to increased demand, that figure is up from £1.2m compared to a year ago. With pandemic-related buying delays ending, the firm’s revenue could be about to surge for the rest of 2021 and beyond.

There’s always the threat of returning restrictions that could impede sales. However, I think the risk is worth the potential reward for this top stock in September and beyond.  

Zaven Boyrazian does not own shares in Savills.

Christopher Ruane: Games Workshop

What strikes me most about the growth story at Games Workshop (LSE: GAW) is how resilient it seems to be. By focussing on a well-defined niche, the retailer has built a competitive moat with strong pricing power. That is boosted by the company’s proprietary intellectual property. Once gamers start playing a particular game like Warhammer, they may continue for many years. Growing royalty income shows the positive business impact of this model.

A risk is that any failure to keep up with gaming fads could dent revenues.

Christopher Ruane owns no shares in Games Workshop.

G A Chester: Rolls-Royce 

The market responded positively to the recent half-year results from Rolls-Royce (LSE: RR). The company reported good progress on its cost-savings and disposals programmes. And it reiterated its expectation of turning free cash flow (FCF) positive (excluding disposals) “sometime during the second half of this year.” 

A slower recovery in flying hours than currently anticipated would hold back progress in the civil aviation division and likely the share price. However, with management also “positive on the near-term opportunities” in its defence, power systems and other businesses, I’m expecting good news on the FCF target and I see the shares continuing to advance. 

G A Chester has no position in Rolls-Royce.

Edward Sheldon: Legal & General Group

My top British stock for September is Legal & General Group (LSE: LGEN). It’s a leading FTSE 100 financial services firm that offers investment management, insurance, and retirement solutions.

LGEN posted a solid set of H1 results last month. For the six months to 30 June, operating profit was up 14% while earnings per share were up 21%. On the back of this performance, the company announced an interim dividend increase of 5%.

In my view, LGEN shares are very cheap. At the time of writing, the stock sports a P/E ratio of about 8.5 and a yield of around 6.75%. I see those metrics as attractive.

Edward Sheldon owns shares in Legal & General Group

Paul Summers:

The combination of rising inflation and the relaxation of travel restrictions makes me even more bullish on the outlook for comparison website (LSE: MONY). The former should drive people to search for savings on regular bills. The latter should allow for a strong rebound in travel insurance.

Changing hands for 19 times earnings, MONY is a quality business that still trades at a reasonable price. As a holder of the stock already, I’m happy to collect the dividends while I wait for a recovery. The shares currently yield a chunky 4.6%.   

Paul Summers owns shares in

Nadia Yaqub: BP 

As an income hungry investor, I was impressed by the recent half-year results from BP (LSE: BP). The rise in the oil price has clearly helped. It increased its second quarter dividend and is carrying out share buybacks. The stock comes with a 6.5% dividend yield.

Even BP’s financial position is improving. Asset disposals have reduced its net debt position. Of course, this is only a temporary measure so that it can get back on the right track. Now that economies are recovering from the pandemic, the demand for oil should rise, which should be positive for the stock.

Nadia Yaqub does not own shares in BP

Andy Ross: Flutter Entertainment  

In August, gambling company Flutter Entertainment (LSE: FLTR) reported first-half earnings that were up by 75%. It benefited from its Stars acquisition in the US and the recommencement of sporting events.  

I think given its early lead into the US gambling market, which has only really opened up as an opportunity since 2018, the company should do well for years to come.  

It’s investing a lot in the US and as a result now has a 45% share of the US online sportsbook market. It’s also expanding via acquisition. It bought Stars in May 2020 to expand its US footprint.  

The stock price has fallen in recent months, so there’s plenty of opportunity for a recovery through September. Flutter could also be a bid target for a large US group.  

Andy Ross owns shares in Flutter Entertainment.

Jonathan Smith: SSE

SSE (LSE:SSE) is a well-known energy provider. I think it’s appealing due to the push towards renewable energy output. For example, it’s aiming to treble renewable output and cut carbon intensity by 60%, all by 2030. This should see demand for shares from ESG investors.

I like the stock also from the dividend appeal. The dividend yield currently sits at 4.99%, easily above the FTSE 100 average. Finally, the utility sector is a good defensive area. This is due to inelastic demand for the services provided. The relative stability of the SSE share price could therefore offer me some protection in case we see another stock market crash.

Jonathan Smith does not own shares in SSE.

Manika Premsingh: Persimmon

FTSE 100 house-builder Persimmon (LSE: PSN) may look like an unlikely pick considering the recent cooling off in the property market. But I think there are plenty of positives to it.

One, its recent trading updates are positive. Two, its peer Taylor Wimpey’s recent results and outlook also suggest that the housing market is still buoyant. Three, interest rates are still moderate, which can encourage house buyers. Four, economic growth is expected to pick up, which can also boost demand for houses.

Five, despite significant recovery in share price since the market crash of early 2020, its price-to-earnings (P/E) ratio is still a tad below 15 times. This makes it a relatively affordable FTSE 100 stock.

Manika Premsingh has no position in Persimmon

Chris MacDonald: BP

BP (LSE: BP) remains a key beneficiary of rising commodity prices. Despite risks to commodity price increases, including a slowing of demand expectations due to the Delta variant and the potential for more supply to enter the markets, Brent Crude still trades above $70 at the time of writing.

These elevated crude oil prices should continue to drive expectations of earnings growth for BP. Year on year growth should remain strong, given last year’s depressed base. Additionally, as travel demand resumes, and economic data continues to roll in, I think the upside with BP outweighs its risk right now. Accordingly, this is a top stock I’m considering for my portfolio in September.

Chris MacDonald does not own shares in BP.

The post Top British stocks for September appeared first on The Motley Fool UK.

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The Motley Fool UK has recommended Flutter Entertainment, Games Workshop, Marston’s and Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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