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Every month, we ask freelance writers to share their best ideas about stocks to buy with investors – here’s what they said in March!
[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]
3i Group
What we do: 3i Group is an investment business working in private equity and infrastructure.
By Edward Sheldon, CFA. I’m sure that 3i Group (LSE: III) shares are currently undervalued.
For starters, the company’s price-to-earnings (P/E) ratio is very low. Now, there are only four. That is also below the UK market average.
Second, 3i Chairman David Hutchison recently bought around £230,000 of the company’s shares. Generally, company insiders buy a company’s stock when they believe it is undervalued. It is important to note that Mr. Hutchison has a lot of experience in the investment world. Previously, he was Head of UK Investment Banking at Dresdner Kleinwort. So they probably have a pretty good idea of the intrinsic value of 3i.
Currently, 3i’s profit and loss can fluctuate quite a bit. If they break, the stock may not look cheap.
I am encouraged by the new director’s dealing activities, though. I think the risk/reward skew here is attractive.
Edward Sheldon has no position in 3i Group.
Centamine
What we do: Centamin explores, mines and develops precious metals through operations in Egypt and Ivory Coast.
By Charlie Carman. Centamine (LSE:CEY) shares offer exposure to gold, which can prove invaluable in times of crisis. The Sukari gold mine in the Nubian Desert is the jewel in the company’s crown when it comes to productive assets.
One advantage of investing in Centamin through an ETF that tracks precious metals is the passive income that the shares generate. Currently, the company yields a 6.5% dividend.
The miner has raised its gold production guidance by around 5% for 2023. In addition, it expects costs to fall below the industry average. This bodes well for future share price growth.
One risk Centamin faces is its reliance on Egyptian operations. After the fall in production at Sukari in 2020, the share price fell and has not yet recovered.
However, a pre-development study at Centamin’s Doropo mine in Côte d’Ivoire shows efforts to diversify the company’s revenue stream are underway. I will buy this stock this month.
Charlie Carman has no position in Centamin.
Forterra
What it is: Forterra makes bricks. In particular, the London Brick Company made bricks used in British homes.
By Stephen Wright. Share on Forterra (LSE: FORT) trades at a price-to-earnings ratio (P/E) of around 8. I think the shares are great value at that price.
Sometimes, when a stock is trading at a low P/E ratio, it can be a sign that the market is expecting a decline in earnings. I think that’s probably true of Forterra.
Higher interest rates that make mortgages more expensive will reduce the demand for new homes. That would be a huge windfall for Forterra.
But at today’s prices, I think that the stock has enough of a safety margin built into it. The stock pays a dividend, which yields more than 5% at current prices.
Even if it gets cut in half due to lower earnings, a 2.5% dividend still isn’t a bad yield in the short term. And when housing demand is normal, I think buying Forterra stock today would be a good investment.
Stephen Wright has no shares in Forterra.
Redrow
What it does: FTSE 250 housebuilder Redrow specializes in building high quality homes, targeting more affluent buyers.
By Roland Head. Redrow (LSE: RDW) is popularly known Inheritance various house designs. However, the company is moving forward by introducing modern, low-emission technology into new homes. Air source heat pumps and underfloor heating are now standard in Redrow homes.
These FTSE 250 stocks have sold off as the market has fallen in value. Although I can see some short-term risk, I think this business has been priced for a cautious outlook. Shares trade around 10% below book value of 580p and give a forecast yield of 5.6%.
Another attraction is that founder Steve Morgan remains the company’s largest shareholder, with a 17% stake. I think the impact will help ensure that management avoids costly mistakes.
Although the outlook for 2024 is uncertain, Redrow’s financial position looks healthy to me. I believe this stock offers good value at current levels, in a medium-term view.
Roland Head has no shares in Redrow.
Ten Entertainment Group
What it is: Ten Entertainment Group operates 1,143 ten-pin bowling lanes in the UK through around 50 sites.
By Royston Wild. Ten-pin bowling has enjoyed a renaissance in the UK over the past decade. This improvement was hampered by the Covid-19 lockdown, but player participation has been excellent since the lanes reopened.
Trading is strong from the leisure segment Ten Entertainment Group (LSE: TEG) reflects the strength of the rebound. Sales look set to rise 40% year-on-year in 2022, a result that has prompted the company to predict profit growth that beat consensus.
I expect the company’s full year report on Wednesday 22 March to reveal that trading remains strong at the start of 2023. Bowling is not an expensive way to support a family and I expect sales to remain strong this year despite the cost of living crisis.
Shares of Ten Entertainment are pretty cheap on paper. They trade at a forward P/E ratio of just 8.5 times. These low valuations give you extra room to gain new stock prices once the year’s figures are complete.
One last thing: at current prices, Ten Entertainment also yields a 4.9% prospective dividend.
Royston Wild has no shares in Ten Entertainment Group.
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