This Month's Top 10 Share Ideas

Published in Investing on 31 May 2012

Here are May's top tips from the Motley Fool's writers.

Ongoing eurozone panic has hit the FTSE 100 again, and it could be on for its worst month since August. After opening the month at 5,738, it looks like it's going to reach the end of May around 5,330, for a fall of 7%. How recently that elusive 6,000 mark seemed again in sight, but the index hasn't been up that high since July last year.

But many good companies aren't too bothered by what's happening across the channel, and our writers have not been short of share ideas in May. In fact, a market fall only makes them cheaper!

1. BT

With the dividend cut back during the credit crunch, and fears of its pension fund deficit constantly in the air, many investors have turned away from BT Group (LSE: BT-A) in recent years. But after a good set of full-year results saw profits and cash flow rising, as well as a nice increase in the dividend, Malcom Wheatley reckons that the recent share price slide means that BT has moved into bargain territory.

2. SSE

With the recession going on, many people are turning to defensive shares that pay high dividends, including top dividend investor Neil Woodford, whose current favourites are revealed in the free Motley Fool report "8 Shares Held By Britain's Super Investor". Our very own Roland Head agrees, as he highlights a 6% dividend yield as one of the top reasons to buy shares in the FTSE 100 multi-utility SSE (LSE: SSE). Any company that places "sustained real dividend growth" as a primary objective has to be worth a serious look.

3. RSA

Financials aren't exactly hot these days, but David Holding reckons RSA Insurance Group (LSE: RSA) is worth a look. While recognising that insurance companies are difficult to value, David points to the forecast 9% dividend yield and suggests one of two things will happen -- it will either be cut, as the market seems to think, or the share price will rise to reflect it. On the occasion of the firm's interim results, David believes the market has got this one wrong.

4. SABMiller

How can you argue with a company whose share price has beaten the FTSE for 11 years in a row? That's what Roland Head was asking about SABMiller (LSE: SAB) in his second entry this month. Since 2002, the beer giant has gained 320% while the FTSE 100 has only just broken even. With the shares on a price-to-earnings (P/E) ratio of 17, they're slightly above the long-term market average, but is there more growth to come? With a 12% increase in the dividend this year, it's a hard one to argue against.

5. Smith & Nephew

Smith & Nephew (LSE: SN) is a company we hope you'll never have to encounter, but if you should, you can be assured that its hip replacements, trauma treatments and keyhole surgery equipment are up there with the world's best. Cliff D'Arcy took a look over the firm's first-quarter results this month and liked what he saw, pointing out that Neil Woodford is already 11% up on the shares.

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6. KCOM

If you fancy the telecoms sector, but want something smaller with more exciting growth potential than the biggies like BT and Vodafone (LSE: VOD), Alan Oscroft thinks there's a good one in KCOM (LSE: KCOM), formerly Kingston Communications. With improving margins, falling debt, a growing dividend and hardly any pension deficit, KCOM might well prove to be a nice little earner.

7. Persimmon

Alan Oscroft also took a look at the building sector this month, and identified three housebuilders he'd buy now. But Kevin Godbold has a better idea, and has picked Persimmon (LSE: PSN) as his favourite. Why? Well, full-year results revealed a 48% increase in underlying earnings per share and the dividend was boosted by a third. But what really swayed him is that the firm has announced its dividend plan right up to 2021, and it represents an annual rise of around 12%.

8. N Brown

If you haven't heard of it, N Brown Group (LSE: BWNG) operates a whole raft of catalogue and online shopping brands, and has been doing pretty well with them. And the FTSE 250 company has just released results that impressed Kevin Godbold, here with his second pick for the month. With a 7% rise in earnings and a 5% dividend hike, Kevin sees N Brown as his favourite retail share at the moment.

9. Avon Rubber

Tony Reading has taken a liking to Avon Rubber (LSE: AVON) after perusing its latest interim results, and what he sees is a company doing very well in its two niche markets. Tony likes the strength of the management team, and points out that though Avon has a high market share, there are emerging market growth opportunities out there. He also thinks Avon could be a potential takeover target, which adds a bit of extra excitement.

10. Punt of the month

Roland Head is back for his third visit with a favourable view on Gulf Keystone Petroleum (LSE: GKP), which has rewarded investors with a 4,000% rise since the depths of 2009. The explorer has made some of the best finds in recent years, and is sitting on another one in the shape of its Shaikan field. Why is this a punt? Well, we're still only at the estimation stage, and oil fields often hold surprises. And it's in Kurdistan, so there's added political risk.

What next?

This month's ideas cover varied ground, from looking at solid defensive sectors to a few less well-known smaller companies with growth potential. Please use them as starting points for your own ideas, and don't forget to do your own research.

If you think property is a sector that has some comeback potential, but are too cautious to go for any individual companies, there are several options. One might be the FTSE UK Commercial Property Index Fund Limited, a new investment trust that Alan Oscroft took a look at.

And Tony Luckett gave us his thoughts on a couple of real-estate investment trusts (REITs) that focus on London property -- Great Portland Estates (LSE: GPOR) and Shaftesbury (LSE: SHB).

Oils, Pharmaceuticals, Banks, Telecoms -- just where should you invest today? "Top Sectors Of 2012" is the Motley Fool's latest guide to help Britain invest. Better. The report is free.

Further investment opportunities:

> Alan does not own any shares mentioned in this article. The Motley Fool owns shares in Smith & Nephew.

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