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Five stocks to watch this December

  • Five stocks to watch this December

For more confident investors stock picking can be a highly rewarding activity. This article identifies five shares which could be suitable for SIPP investing.

As companies with appealing good long-term prospects, depending on your age, they could prove a good fit within a SIPP portfolio.

1. Prudential (PRU)

Insurance behemoth Prudential is growing at a healthy pace and has plans to enhance shareholder value. The company hopes to spin out its UK operations as a separately-listed business called M&G Prudential. Prudential’s shareholders will get free shares in M&G which will focus on savings and retirement needs for individuals in the UK and Europe.

This demerger would leave its faster growth US and Asian businesses as a separate entity. While it may seem that investors may have more interest in the high growth parts of the business, it should be remembered that M&G and the PruFunds arm both had record inflows in 2017.

Investing in companies which have announced a demerger can have upsides generally. A demerged business can allow management to take control of its own destiny and make decisions that best serve its needs rather than those of a larger conglomerate.

They can also be more entrepreneurial when demerged and remuneration for key players can be more closely aligned with business objectives and performance.
Mike Wells, chief executive of Prudential, reinforced the above point saying that following the separation M&G Prudential will have more control over its business strategy and capital allocation.

The existing group released its half year results in August and its growth credentials were on show again. Its operating profit rose 9% to £2.4bn year-on-year with its chief executive saying the performance has been led by Asia again.

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2. Halma (HLMA)

This is a global manufacturer and seller of a wide range of equipment largely demanded by health, safety and environmental rules. This includes hazard detectors, sensors and assorted environmental protection kits. The approach allows the FTSE 100 member to consistently perform almost regardless of the economic cycle.

Organic growth is supplemented by carefully selected bolt-on acquisitions. Halma is very careful in how it chooses its business areas, seeking resilient growth drivers based on advances in safety regulations, ageing and urbanising populations, and other demographic trends.

It also buys niche market businesses that generate strong returns and which it can help to develop – under a strategy called Halma 4.0.

The company also has an excellent track record of growing its dividend for nearly 40 consecutive years by 5% or more.

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3. Ricardo (RCDO)

The engineer is best known for its expertise in the automotive industry, helping vehicle manufacturers to measure emissions and increase performance efficiency.

It also has expertise with environmental issues such as water resource management and environmental impact assessment.

Furthermore, it has a growing rail business where it helps clients to navigate the industry’s operational, commercial and regulatory issues.

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4. CRH (CRH)

FTSE 100 building materials business CRH provides everything from foundations to frames, roofing and interiors to the construction industry. It has operations in 32 countries and employs some 85,000 people across 3,600 locations.

The Dublin-headquartered company’s business model involves continually looking to see how existing businesses can be improved and making select acquisitions. CRH aims to be diversified across different products, geographies and end-uses to mitigate fluctuating demand at different points of the business cycle.

In recent years the company has achieved a material improvement in its profitability and returns.

The company’s strong cash generation should allow it to participate in further M&A activity. Despite spending €1.9bn on acquisitions in 2017, net debt fell slightly through the course of the year to €5.8bn or 1.8 times earnings before interest, tax, depreciation and amortisation.

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5. DS Smith (SMDS)

There’s a lot of takeover activity in the packaging sector at present as companies seek to build scale against a buoyant industry backdrop. Demand is soaring thanks to the e-commerce boom and an improving global economic outlook.

One company helping to consolidate the industry is DS Smith. It produces, collects and recycles packaging and works with some of the biggest names in the consumer goods industry such as Unilever, Nestle and Procter & Gamble.

Having made several acquisitions in Europe, the company recently shifted its attention to the US. It has been able to do big deals by leveraging its own scale and borrowing capacity in the knowledge that debt can be rapidly paid down from its own reliably large cash flow.

Last year it bought Interstate Resources for £722m which was immediately earnings-enhancing. The deal helps it to expand its international fibre-based packaging business in the US.

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When looking at stocks for a SIPP portfolio what you should never do is lose sight of your ultimate objective – which is building a portfolio which can provide you with a decent standard of living when you retire. So, while shares have historically offered better returns than cash and other asset classes, you should still do careful due diligence before investing.

Investing within a SIPP can help boost your retirement income

  • Be in control of your retirement pot

    A SIPP gives you the flexibility and control to choose how your money is invested across a range of asset classes and sectors. Sign in at any time to invest or monitor performance.

  • Benefit from up to 45% tax relief

    The government will add 20% tax relief to contributions you make to your SIPP. Furthermore, higher and top-rate tax payers can claim up to an extra 25% back on their tax return. 

     

  • A great way to boost your retirement income

    SIPPs allow you to invest and gain tax relief on contributions up to £40,000 per annum. Thanks to the carry forward rules, any unused allowance can be rolled over for up to three years, meaning you could invest up to £120,000.

  • Take advantage of tax breaks

    Any capital gains made within a SIPP are tax free, and you can withdraw a 25% lump sum tax-free from the age of 55. That’s more money for you to spend in retirement.

     

  • Be in control of your retirement pot

    A SIPP gives you the flexibility and control to choose how your money is invested across a range of asset classes and sectors. Sign in at any time to invest or monitor performance.

  • Benefit from up to 45% tax relief

    The government will add 20% tax relief to contributions you make to your SIPP. Furthermore, higher and top-rate tax payers can claim up to an extra 25% back on their tax return. 

     

  • A great way to boost your retirement income

    SIPPs allow you to invest and gain tax relief on contributions up to £40,000 per annum. Thanks to the carry forward rules, any unused allowance can be rolled over for up to three years, meaning you could invest up to £120,000.

  • Take advantage of tax breaks

    Any capital gains made within a SIPP are tax free, and you can withdraw a 25% lump sum tax-free from the age of 55. That’s more money for you to spend in retirement.

     

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