By Royston Wild
We’re a year and a half down the line from that hazy day in summer 2016 when the British electorate, by a margin of 52% to 48%, elected to leave the European Union.
In that time there’s been plenty of talk as to how to enact the withdrawal but very little action. This means that, with less than four months to go until the UK is set to withdraw from the trading block, the squabbling, backbiting and sheer panic in Westminster has reached fever pitch. And particularly as the prospect of a disorderly Brexit, and with it the threat of political and economic meltdown, becomes bigger with every passing day.
Begbies Traynor Group
Whilst the uncertainty surrounding the saga is taking chunks out of the British economy and beating up companies both large and small, Begbies Traynor Group is a stock that has what it takes to thrive in these tough economic conditions that threaten to spread beyond 2019.
The AIM-listed business provides a variety of services, like assisting with insolvency or closure proceedings, for people and firms in financial distress. The number of insolvencies in the UK have sprung to multi-year highs in 2018 — up 6% year-on-year in the six months to June, according to Begbies Traynor’s latest market update in September — and I’m expecting this to be again reflected in next trading statement scheduled for Wednesday, December 19.
Begbies Traynor lifted the dividend for the first time in seven years, to 2.4p per share, in the year to April 2018 thanks to ripping earnings growth and the group’s strong generation. It’s unsurprising, then, that City predictions of profits growth of 9% and 4% for fiscal 2019 and 2020 respectively feed through to forecasts of fresh dividend growth as well.
A 2.6p per share reward is estimated for this year, resulting in a chubby 3.9% yield. The readout moves to 4.1% for next year, too, because of the anticipated 2.7p dividend.
At current prices Begbies Traynor’s forward P/E ratio of 15 times sits bang on the widely-accepted value benchmark of 15 times (or under). Given the rate at which its strong markets are likely to continue improving, at least through the medium term, I believe this makes the business a bargain right now.
It’s a good idea to have some exposure to precious metals given the fears surrounding Brexit, not to mention the swathe of other concerns running through investors’ minds, from the possible impact of Federal Reserve policy tightening through to the potential consequences of the US-China trade war.
One great way to play this theme is by snapping up gold diggers like FTSE 250 firm Centamin. Its share price has remained resilient in recent days amid the broader washout on global share markets, and recent data concerning the strength of bullion demand shows why.
According to The Pure Gold Company yellow metal demand spiked by a staggering 398% on Tuesday when prime minister Theresa May’s Brexit plan was being savaged in the House of Commons. The retailer added that, since the beginning of November, it’s seen a 278% increase in the number of people substituting equities within their pension and self-invested personal pension for gold.
The sentimental metal is very much in vogue, then, and in the current macroeconomic and geopolitical environment it’s only likely to rise. Therefore buying Centamin would appear to be a wise decision today, and not just because of its predicted dividends of 5.4 US cents and 7.2 cents for 2018 and 2019 respectively. These figures yield a giant 4.2% and 5.6%.
There is some concern over Centamin’s production outlook for 2019 following recent problems which forced it to cut full-year targets for 2018 to 480,000 ounces, a figure that caused City analysts to predict a 29% earnings drop.
In my opinion, though, the possibility of further output troubles is reflected in the company’s cheap forward P/E ratio of 15 times. It’s a stock very much for the moment, in my opinion, as underlined by broker projections of a 21% earnings rebound. Like Begbies Traynor, it’s a great share to load up on today given the chance of electric share price growth next year and possibly beyond.