2 steady growth stocks I'd consider buying even if markets fall


No investor wants to lose money, but unfortunately markets go up and down so we have to look for those stocks that will produce a return in all market environments.

CMC Markets(LSE: CMCX) is an excellent example of a stock that can do just that. This financial business, which mainly provides contracts for difference and spread-betting trading services to high net-worth individuals, should profit from rising markets as investors try to buy into the rally, and it ought to benefit from a falling market as investors bet on further declines. The only time the company may struggle to make money is if markets flatline, which is unlikely to happen in my opinion. For CMC, volatility is good so, for long as financial markets exist, the business will be able to generate income.

Construction and regeneration group Morgan Sindall(LSE: MGNS) is another company that will be able to profit no matter what the market environment. After the collapse of contractor Carillion, investors have been cautious around the UK's construction sector. However, Morgan is a standout operator. 

Unlike many of its peers, management prioritises cash generation, and according to the firm's full-year results for 2017, the group ended the year with a net cash balance of £193m. Overall for the year, adjusted operating profit increased 14% to £68.6m as revenue rose 9%. Adjusted earnings per share leapt 43% to 121p, and this robust performance has given management the confidence to hike the full-year dividend by 29% to 45p.

Slow and steady wins the race 

Morgan might not be the most glamorous stock, but over the past five years the business has grown steadily, and City analysts are expecting more of the same in the years ahead, with earnings growth of around 7% of pencilled in for 2018.

Nonetheless, despite this outlook, investors are still giving the company a wide berth due to the pessimism surrounding the UK construction sector. The shares are currently trading at a forward P/E of just 10, which is a substantial discount to the wider market(which, as a whole, is trading at a forward P/E of 14). The shares also support a yield of 3.6% following today's dividend hike.

Too cheap to pass up? 

CMC is also trading at a discount valuation of only 12.3 times forward earnings. The shares support a dividend yield of 5%, which is backed up by just under £33m of cash on the balance sheet. 

It seems that investors are avoiding CMC due to regulators' threat to clamp down on the CFD industry, which has lead City analysts to conclude that the company's earnings per share will decline by 17% in 2019. While this is a threat, I believe that any clampdown will not be as severe as the worst case scenario suggests because CMC targets high value, experienced clients, many of whom could be 'elected professional' (a designation that would allow them to keep trading with the group) relatively quickly. 

With this being the case, current City forecasts could be too pessimistic and, in my view, CMC remains an attractive buy for investors looking for an investment that will succeed in all market environments -- including Brexit. 

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.