2 Brit-biased stocks I'd buy before Lloyds Banking Group plc

The Motley Fool
Photo: JD Sports. Fair Use
Photo: JD Sports. Fair Use

Today I am looking at two stocks that I think are hotter investment prospects than Lloyds Banking Group(LSE: LLOY).


Matinee idol

I reckon Cineworld (LSE: CINE) in great shape to thrive in 2017 as box office takings continue to explode.

Advertising agency DCM announced last week that movie admissions to the end of October rose 2%, movie bible Screen Daily reported. Whilst this figure is hardly explosive in its own right, it helped total UK takings breach the £1bn milestone in record time in 2016. The level was reached on October 8 versus October 25 last year, which itself was then a new record.

Moviegoer demand has been boosted by a steady stream of blockbusters like Marvel's Deadpool and Captain America: Civil War, the latest James Bond outing Spectre, and Harry Potter follow-up Fantastic Beasts and Where to Find Them. Whilst not necessarily popular with the critics, the popcorn flick is more popular than ever, and the slate for next year and beyond is choc-full of high-energy films that should continue to drive footfall.

Like Lloyds, Cineworld is also reliant on British citizens to drive the top line -- the chain sources almost two-thirds of revenues from the UK and Ireland.

But I expect a stagnating British economy to have only a modest impact on Cineworld looking ahead. After all, going to the cinema is a relatively cheap, not to mention universally popular, night out.

Sports star

The British high street faces more of an uncertain outlook, however, as inflation is predicted to rocket from 2017. Having said that, I believe JD Sports Fashion's (LSE: JD) dominance of the 'athleisure' segment should keep earnings ticking higher.

The strong relationships JD Sports has forged with the world's biggest sportswear manufacturers makes it the place to go for shoppers seeking cutting-edge sports-fashion. And the business remains busy expanding its product ranges, not to mention its store network in the UK, to keep consumers flocking through its doors.

Furthermore, the company's aggressive expansion across Europe should help protect it against a cooling domestic retail sector looking ahead and deliver stunning growth in the years ahead.

JD Sports added a net 20 stores to its continental footprint between February and July alone. And the retailer remains busy on the M&A front, too, JD Sports snapping up Netherlands-based retailers Aktiesport and Perry Sport in 2016, as well as 12 The Athletes Foot stores in Portugal, with a view to later conversion to the JD fascia.

Worth the premium?

The City certainly believes that both JD Sports and Cineworld have what it takes to keep punching solid earnings growth. The sportswear giant is expected to punch earnings growth of 27% and 11% in the periods to January 2017 and 2018 respectively, while the cinema chain is predicted to report a 14% bottom-line boost next year.

Conversely, a flatlining UK economy is expected to play havoc with earnings at Lloyds, and a 7% earnings dip is currently forecast for 2017.

While both Cineworld and JD Sports are more expensive than the bank -- the stocks carry prospective P/E ratios of 15 times and 20.6 times for the upcoming fiscal year compared with Lloyds' equivalent figure of 9.7 times -- I believe both company's superior growth outlooks more than merit this premium.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.