5 Shares You Should Have Bought In July

Published in Investing on 1 August 2012

SuperGroup (LSE: SGP), Homeserve (LSE: HSV) and GKN (LSE: GKN) rewarded shareholders last month.

The FTSE 100 (LSE: UKX) was pretty flat again in July, ending the month on 5,635, which was just 64 points (1%) up on June's close of 5,571. That's largely a result of decent interim reports offset by swinging sentiment towards Europe.

But wherever the index is going, let's look at some of July's stock market stars. These aren't just shares whose price went up over the month, but are companies that look like they're setting themselves up for an ongoing strong performance over the longer term.

SuperGroup

SuperGroup (LSE: SGP) shares ended July on 417p, up 80p (24%) from 337p at the end of June. But they're still way down from their 52-week high of 1,136p.

The longer-term collapse was in part due to a series of profit warnings caused by woeful accounting mistakes, a fact that the company confessed to in its annual report -- but the price had been badly over-hyped over the past couple of years.

Annual results showed a 32% rise in sales, with 26 new stores opening during the year and like-for-like sales up 2%. Internet sales are growing and accounted for 10% of sales, and that echoes the success enjoyed by ASOS (LSE: ASC), which has pretty much been a pioneer of successful online fashion selling. We also saw online sales growing nicely at Next (LSE: NXT), which is arguably our best-run high-street fashion retailer.

Forecasts for SuperGroup put the shares on a prospective price-to-earnings (P/E) ratio of around 9 for next year, falling to 8 for 2014. And though there isn't much of a dividend yet, that makes it look like this recovery is not over.

Homeserve

Homeserve (LSE: HSV) is looking like another recovery candidate, as it put on 52p for a 33% rise to 208p during the month.

The home disaster insurance provider was trashed after the Financial Services Authority launched an investigation into possible mis-selling, and it was forced to stop writing new business for a while. But it's looking increasingly likely that the sell-off was overdone -- the shares have recovered from a low of 137.5p reached in June.

Recent forecasts are suggesting earnings per share for 2013 of around 23p and a dividend of 11.3p, with 2014 estimates around the same. That's a P/E of 9, with a dividend yield of 5.4%, which does not look overvalued.

Keller

Keller Group (LSE: KLR) climbed from 361.5p at the end of June to end July on 466p, for a rise of 29%. We expected strong interim results from the ground engineer, and they did not disappoint on 30 July, with a 13% rise in revenues and pre-tax profits trebled to £11m.

Full-year profits are expected to be at the top end of forecasts, and we're looking at a dividend of 5.2% for 2012, rising to 5.3% by December 2013.

The interim net debt figure stood at £119m, but that was down on last year's half-time level of £128m, and represents 1.5x annualised EBITDA. On those measures it doesn't look too bad, but it's still around 40% of the company's market cap. Still, those dividends do suggest the shares are cheap.

GKN

Engineer GKN (LSE: GKN) gained 16.5% over the month to end on 210.4p.

On 31 July, the firm announced interim sales up 16% to £3.46bn and pre-tax profits up 43% to £289m, driven largely by its auto divisions. That allowed the firm to lift its half-time dividend by 20% to 2.4p per share, and if that continues at the full-year stage, we should expect a yield of around 3.4%.

Earlier we heard of GKN's acquisition of AB Volvo's aero engine division for £633m, which was widely considered a nice price. The deal will mean that GKN makes parts for all of the world's major aero engine manufacturers, and with increases in both air passenger and freight air traffic forecasts, and demand growing for a new generation of energy-efficient power plants, this is good long-term news for GKN.

Computacenter

Computacenter (LSE: CCC) shares started to recover from their recent slump in July. From a 2012 high of 448p in March, the price slid to a low of 292p near the end of June, before putting on 21% over the month to end July at 354p.

The IT services contractor's interim trading update on 17 July revealed Group revenues up 4% in the first half, with Group Services revenues up 12%. The company is also in a strong net cash position, and although some European business has been tough, the firm is sticking with its positive guidance for the full year.

And Computacenter is paying strongly growing dividends, which it just keeps raising year on year. With a 4.5% yield forecast for this year and 4.9% next, from shares on a P/E of around 9, I think we're looking at a bargain.

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> Alan does not own any shares mentioned in this article.

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