Top stocks for January

Updated: 
Celebration fireworks

We asked our writers to share their top stock picks for the month of January, and this is what they had to say:

 

Harvey Jones: Ashtead Group

Equipment rental specialist Ashtead Group (LSE: AHT) has rewarded loyal investors with growth of 626% over the last five years, and its momentum looks set to continue. A six-bagger on the FTSE 100 is a rare and special thing, yet Ashtead remains something of an unsung hero.

The reason I am tipping Ashtead now is that its US division Sunbelt contributes around two thirds of the firm's earnings, and looks set to be a prime beneficiary of next year's widely predicted Trump bounce. It looks pricey at 18.33 times earnings but double-digit forecast earnings per share growth, 27.5% operating margins and The Donald's January inauguration all herald a bright start to 2017.

Harvey does not own shares in Ashtead.

 

Jack Tang: Ashtead Group

Ashtead Group(LSE: AHT) is well positioned to benefit from a series of favourable tailwinds. Key among them is the increasingly positive outlook for infrastructure spending in the US, where the equipment hire company earns 90% of its profits.

Then there is the weaker pound, which gives big overseas earners a boost when their foreign earnings are translated back into sterling. But even without the currency benefit, Ashtead is performing well. At constant exchange rates, revenues in the first half of 2016 still grew by a respectable figure of 13%, while pre-tax profits rose 9% to £426m.

Looking forward, City analysts are projecting a 21% rise in earnings per share for the full year, with further growth of 13% expected in 2017.

Jack Tang does not own shares in Ashtead.

 

Kevin Godbold: Britvic

Despite challenging trading conditions, revenue and profit were up around 10% in 2016 for Britvic(LSE: BVIC). The dividend continues a run of rising payouts, up 6.5% for a forward yield around 4.5% at today's share price near 554p.

This branded consumable goods business trades well but the shares have been falling. However, downward momentum stalled during December to leave the stock on a forward price-to-earnings ratio just below 12 -- reasonable given the firm's robust balance sheet and considered strategic plan.

Economic uncertainty fuels investor fear regarding the sector but this stock doesn't look overpriced, and the fat dividend looks set to drive returns in January and beyond.

Kevin does not own shares in Britvic. The Motley Fool UK has recommended and owns shares in Britvic.

 

Rupert Hargreaves: Carnival

Cruise line operator Carnival(LSE: CCL) is a play on both ageing populations and the increasing wealth and mobility of Asia's middle class. 

In October, the group revealed it was expanding its operations in China, giving Carnival four cruise brands in the People's Republic -- one of the planet's fastest-growing tourism markets.

The company is expecting a bumper 2017. Management recently announced cumulative advance bookings for the first three-quarters of 2017 are well ahead of the prior year at considerably higher prices. For 2017, City analysts are expecting the company to report EPS of $4.1 up from $3.7 this year. Based on these figures, shares in Carnival are trading at a forward P/E of 12.1.

Rupert does not own shares in Carnival. 

 

Paul Summers: Character Group

Having recently reported a 22.5% rise in underlying pre-tax profits and 50% jump in international sales on the previous year, I'm confident that the positive share price performance of small-cap toy company, Character Group(LSE: CCT) will continue before it releases a trading update towards the end of January. 

Naturally, a lot of what happens to the shares afterwards will depend on how well Character has done in the run up to Christmas. With UK consumers shrugging off fears over Brexit, however, I see no reason as to why the business will fail to maintain current momentum.  Indeed, the relatively inexpensive nature of Character's products should make the company more resilient than most as we approach our EU departure.

A portfolio of top brands (including Peppa Pig and TeleTubbies), a price-to-earnings ratio of 10, net cash of £6.9m on the balance sheet and a well-covered 3.3% yield -- what's not to like?

Paul Summers does not own shares in Character Group. 

 

Edward Sheldon: DS Smith

Packaging specialist DS Smith(LSE: SMDS) looks attractive at current levels and the stock has the potential to outperform the market in 2017 in my opinion.

Recent half-yearly results were strong, with the company reporting revenue growth of 21% and adjusted operating profit growth of 23% or 9% at constant currency.

Over the last three years the company has increased its dividend by 12%, 14% and 25%, and with analysts anticipating a 10% rise for FY2017, the forward-looking yield is a healthy 3.5%.

The stock has been stuck in a narrow trading range for the best part of two years now, but with the forward-looking P/E ratio now just 12.9 times next year's earnings, I believe it's only a matter of time until the share price continues its march upwards.

Edward Sheldon owns shares in DS Smith. The Motley Fool has recommended shares in DS Smith.

 

Zach Coffell: GlaxoSmithKline

GlaxoSmithKline's (LSE: GSK) big dividend pay-outs have looked shaky in recent years, and the massive 5.2% yield on offer today implies the market doubts its sustainability.

However, the company is diversifying away from the traditional "blockbuster drug" model by focusing on areas that should generate more stable cash-flow, such as vaccines and consumer goods.  

Glaxo's novel two-drug approach to treating HIV has shined in recent testing, implying the company could seriously disrupt traditional therapies. This, combined with an impressive pipeline of other drugs and a forecast 30% earnings bump for FY2016, could drive serious outperformance in the next few years.

Zach owns shares in GlaxoSmithKline. The Motley Fool UK has recommended and owns shares in Glaxo.

 

Ian Pierce: ITV

This month I'm taking a closer look at a contrarian pick that has been hammered due to fears over the health of the UK economy, broadcaster ITV (LSE: ITV). A tough advertising market has led the company to guide for no earnings growth in 2016, but I believe ITV's long-term plan to focus on content creation holds incredible potential. 

Selling the rights to in-house productions like Poldark and The Voice already accounts for over 40% of overall revenue, and year-on-year sales growth was a whopping 18% in Q3. With shares trading at a cheap 12x forward earnings, a healthy balance sheet providing firepower for acquisitions and strong organic growth from the production segment, I'll be keeping a close eye on ITV in January.

Ian Pierce does not own shares in ITV. The Motley Fool UK has recommended shares of ITV. 

 

Roland Head: Royal Mail

Shares of postal operator Royal Mail(LSE: RMG) have fallen by 15% over the last six months. November's half-year results didn't help. Investors were not impressed by flat profits and the threat of strike action. 

However, I believe the market's focus on short-term risks could be providing a contrarian buying opportunity for long-term investors. Royal Mail looks affordable to me, with a forecast P/E of 11 and a prospective yield of 5%. 

Cash generation remains strong, and capital expenditure is due to start falling this year. This should provide support for profits. I continue to hold, and may buy more this month. 

Roland owns shares of Royal Mail.

 

Bilaal Mohamed: Smurfit Kappa

My top stock for January is FTSE 100 newcomer Smurfit Kappa Group(LSE: SKG). Europe's leading corrugated packaging company expects to post record earnings for 2016, and in my opinion is poised to take the blue chip index by storm this year. The £4.5bn packaging firm sneaked into London's top-tier index last month after precious metals producer Polymetal International and Brexit casualty Travis Perkins were relegated to the mid-cap FTSE 250 index.

Our friends in the City are expecting Smurfit to post a 4% rise in underlying earnings in 2017, leaving the shares trading at a bargain 10 times forecast earnings, and supported by a rising dividend currently yielding a healthy 3.8%. I think the Dublin-based packaging firm could be a shrewd buy ahead of February's full-year results.

Bilaal has no position in any shares mentioned.

 

Royston Wild: WH Smith

While the outlook for the broader British retail sector remains somewhat subdued, I reckon WH Smith(LSE: SMWH) has what it takes to thrive in 2017. And I believe the firm's next trading statement on January 25 could provide the share price with fresh rocket fuel.

The stationer and paper seller beat analyst's expectations in October by announcing an 8% bounce in pre-tax profits during the 12 months to August 2016, to £131m. While takings at the company's High Street division continue to struggle -- like-for-like sales slipped 2% in the period -- WH Smith's successful cost-cutting measures are helping to keep profits moving higher.

While the firm's Local stores and Post Office concessions in the UK provide plenty of revenues potential looking further down the line, it is the firm's Travel arm that promises to really light a fire under the bottom line. Surging traveller numbers helped power total sales here 10% higher last year, and WH Smith is looking to capitalise on this by expanding its international footprint. And with good reason -- Travel revenues from overseas are growing by 39% each year.

A predicted 5% earnings rise at WH Smith during fiscal 2017 results in a very-attractive P/E ratio of 14.8 times. And this leaves room for fresh stock value strength, in my opinion.

Royston Wild has no position in any shares mentioned.

Buy-And-Hold Investing

Our top analysts have highlighted five shares in the FTSE 100 in our special free report "5 Shares To Retire On". To find out the names of the shares and the reasons behind their inclusion, simply click here to view it immediately with no obligations whatsoever.