5 Shares For The Week Ahead

Published in Investing on 7 December 2012

Reviewing your portfolio over Christmas? Here are five to consider.

It's the time of year when there is little coming from FTSE 100 (UKX) companies. So instead of a look at next week's news, I thought I'd examine a handful of companies that I think are well worth considering for the forthcoming year -- ones that have been in the news recently, or whose price movements make them look attractive:

Tesco

Tesco (LSE: TSCO), is a very popular shareholding. But is it worth buying the shares now? I think it is, and here's why:

Tesco's post-Christmas price fall was overdone, I reckon, and I added Tesco to the Fool's Beginners' Portfolio. But more tellingly, Warren Buffett chose to top up his holding.

In its recent third-quarter update, Tesco told us that its revamp plan is going well, with nearly 300 stores refreshed and over 3,000 product lines introduced or upgraded. Like-for-like food sales rose by 1.2%, with overall sales up 2.9%.

Tesco is also to pull out of the USA, just as it exited Japan when it was clear it could not compete with local market leaders -- Tesco's directors know when to cut their losses. The rest of Tesco's overseas businesses are doing just fine.

Forecasts for Tesco indicate a dividend yield of around 4.6% on a share price of 336p, and I think that is excellent for such a safe company.

Vodafone

Vodafone (LSE: VOD) is another one in the Beginners' Portfolio. The shares reached a high of 191p in August, before crashing to a low of 156p in November -- they're back up a bit to 162p now.

Tough conditions in Europe, which led to some write-down losses, and a resulting expectation of a slowdown in earnings, caused the fall. But Vodafone is globally diversified and can handle slumps in some markets without too much pain.

Vodafone's dividend yield should be somewhere between 6.2% and 7% for the year to March 2013, with a pick-up in earnings growth expected for the following year. And with the first-half payout having been lifted by 7.2% to 3.27p per share, we should be fairly confident.

Vodafone will also use £1.5 billion of its Verizon Wireless dividend for a share buyback, which will spread future dividend payouts over fewer shares -- and if the price does not appreciate, then the dividend yield should rise.

Centrica

Centrica (LSE: CNA) shares have been on a bit of a surge, putting on 10% in the past few weeks to reach 340p. The rise was spurred further this week by the news that Hinkley Point B and Hunterston B power stations have received approval to operate for a further seven years, from 2016 to 2023.

Centrica is a great dividend payer, and even after the recent price rise, forecasts suggest a dividend yield of around 5% from shares on a modest price-to-earnings (P/E) ratio of 12. Centrica's dividends are also better covered that some of the other utilities companies.

People doing a year-end review of their portfolios might do well to consider adding this dependable cash cow to the mix.

Wolseley

Wolseley (LSE: WOS) is a rare beast -- a FTSE 100 constituent whose share price has galloped. The building materials firm has seen its price grow from a low of £19 back in December last year to £28.33 today -- close to 50%.

Full-year results in October showed an 18% rise in earnings per share, allowing the dividend to be boosted by a third to 60p per share. And then first-quarter results this week showed a 7.6% rise in trading profit, from a 2.1% growth in like-for-like sales -- with net debt almost wiped out.

You'd have done very well to buy Wolseley shares in November. And it's looking increasingly like there's a good long-term future for this "picks and shovels" company, which should do well from the recovering construction industry.

Royal Bank of Scotland

There must be a point when our bailed-out banks up worth buying again, mustn't there? The Royal Bank of Scotland (LSE: RBS) share price has hit a 52-week high of just over 300p, surging from a July low of 197p.

At the first-half stage, the bank recorded at pre-tax loss of £1.3 billion, but it's forecast to be back in profit for the full year. Analysts have earnings per share of around 17p pencilled in for this year, and 26p next, with the 2013 figure putting the shares on a P/E of 11. Worth considering as a Christmas present for your portfolio? I'm no banking expert, but plenty of people who are have been buying the shares.

Finally, the secret to becoming rich from shares is simple long-term investing in fundamentally sound companies, and letting steady growth and dividends power your wealth upwards.

That's why it's always worth keeping abreast of what news is coming our way each week, and doing some background research on promising-looking candidates.

Achieving that near-mythical millionaire status might seem like a pipe dream, but it really is feasible for ordinary everyday investors like you and I. But if you have your doubts, read this free Motley Fool report and see if you change your mind. The report won't cost you a penny, so click here to have a copy delivered to your inbox while it's still available.

> Alan does not own any shares mentioned in this article. The Motley Fool owns shares in Tesco, and has recommended shares in Vodafone.

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Comments

The opinions expressed here are those of the individual writers and are not representative of The Motley Fool. If you spot any comments that are unsuitable hit the flag to alert our moderators.

MAACPRIME 08 Dec 2012 , 8:01am

With advice like this, why nit just buy an index fund?

johandesilva 08 Dec 2012 , 1:00pm

With Verizon Wireless growth rate I would hope Vodafone would be good for 15%+ gain and outperform an index fund within a year.

With gold strong, for growth one could invest in a gold miner, as they are cheap relative to earnings. Both HGM and AAZ offer spectacular low P/E and one even has a good dividend. Both good for a 50% upside within a year as long as Gold does not go down.

Oil not doing too in these times with GENL and XEL looking cheap but with the risk of being locked in for more than a year due to volatility.

Good *luck* to everyone in 2013

richjfool 08 Dec 2012 , 3:46pm

I understood that Tesco were going to review their US operations and that as yet no decision has been made to pull out. Everyone seems to be jumping to conclusions.

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