Investors’ Top 10 Favourite Stocks: Lloyds and Natural Resources

Topping the most popular stocks charts in June are Lloyds, natural resources and utilities stocks, according to Morningstar data 

Karen Kwok 5 July, 2017 | 10:07AM

Which equities are Morningstar readers interested in? According to hits data, last month investors were looking at mining stocks and utilities stocks. Lloyds remains the most popular stock on Morningstar.co.uk for the 21st consecutive month.

Below we list the most popular stocks in June, staring from the top one.

Lloyds Banking Group (LLOY)

The UK government selling down most of its stake in Lloyds during 2016, with its remaining share at below 5% at the beginning of 2017, said Derya Guzel, equity analyst with Morningstar. While this sale was mostly expected by analysts and the market, this is a positive development, both from the perspective of shareholders and in terms of commercial independence, said Guzel. The stock is up 6.7% year to date and it is rated as a four-star stock by Morningstar equity analysts, meaning they believe the stock is trading below its fair value estimate.

88 Energy (88E)

88 Energy engaged in exploration of oil and gas resources in Alaska. The stock is up 14% year to date. The company is working on an exploration in North Slope of Alaska named Project Icewine. The area is the host the largest conventional oil pool in North America. While the project has begun the stage two of the project, any negative news could affect the share price.

“A little patience is now required as we give the rocks time to show us what they can deliver,” said Dave Wall, managing director of 88 Energy.

Sirius Minerals (SXX)

Sirius Minerals is a producer of multi-nutrient fertilisers. The company is currently organised into one business division: the UK segment. The stock is up 57.6% year to date. This company is a small-cap stock, meaning it can have a more volatile share price – as was seen last year.

Sirius Minerals’ share price came down 60% from the peak level at 45.5p in August last year to 18p in December. Despite the strength of the company’s share price so far this year, the current level is still lower than the August’s peak level.

Last week at Sirius Minerals’ quarterly update, the company said its projects remain on time and on budget.

“It has been a productive quarter with timely progress made on site preparation works in advance of shaft sinking commencing in quarter three.  The team on site and at our headquarters has grown considerably as we continue with the delivery of the Woodsmith Mine and its associated infrastructure,” said Chris Fraser, chief executive of Sirius.

Premier African Minerals (PREM)

Premier African Minerals is engaged in the mining and exploration, evaluation and development of natural resource properties on the African continent.

In June the company reported strong results from the initial metallurgical test work study on its wholly-owned Zulu Lithium and Tantalum project in Zimbabwe. The test work was completed by German based Dorfner Anzaplan GmbH, a leading authority in the field of lithium and speciality minerals processing and treatment. 

National Grid (NG.)

National Grid has grown into one of the largest utilities in the world since UK regulators unbundled energy distribution, transmission, and supply in the 1980s. Share prices of National Grid are down 8% year to date. The stock is rated as a four-star undervalued stock by Morningstar analysts.

National Grid earns about 30% of its profits from the United States, but that is rising as the US dollar strengthens, US regulation improves, and National Grid pursues large investment opportunities in the US, said Travis Miller, director of utilities equity research with Morningstar.

“Allowed returns on equity in the US and UK have come down in line with interest rates and could fall further. Dividend growth has slowed dramatically as financing needs required management to target inflation-linked growth. In 2015 and 2016 dividend growth has been underwhelming at 2%,” said Miller.

BT Group (BT.A)

BT is down 20% year to date. The stock is rated as a four-star undervalued stock by Morningstar analysts. BT’s valuation was hurt by Italian accounting issues and weakness in the UK public sector.

BT's global services division and the UK public sector are struggling, negating growth in the retail division, said Allan Nichols, senior equity analyst with Morningstar. However, in the longer term, Nichols expects the global services division of BT to return to revenue growth.

Boohoo.com (BOO)

Boohoo.com is an online fashion retailer catering for men and women in the UK and internationally. The share price is up 74% year to date. Revenues for the online retailer were up 106% in the first three months of this year to £120 million, from the same time last year. Like-for-like revenue growth rose 78% as well.

As a result of very strong trading momentum in the first quarter, the company now expects the company’s revenue growth for the full year to February 2018 to be around 60% rather than the previous expectation of “approaching 50%”, a published statement read.

Carillion (CLLN)

Carillion provides services to create and manage places and infrastructure, from project finance through design and construction to lifetime maintenance. The stock is down 20.4% year to date.

Petrofac (PFC)

Petrofac is an internationally focused oil and gas engineering and construction company with 2015 revenue of $6.8 billion. Petrofac is down 48% year to date, following the May 25 announcement that the company's chief operating officer had been suspended as a result of ongoing investigation by the UK Serious Fraud Office. Morningstar equity analysts then widen their uncertainty rating for Petrofac to ‘extreme’. The stock is rated as a four-star undervalued stock by Morningstar analysts.

“The investigation of Petrofac involves the allegations of bribery and corruption involving the company's operations in Kazakhstan from 2002 to 2009. Given that the investigation does not seem to involve current operations, and also given the estimates we've seen of worst-case fines, we suspect that the 30% drop in the company's share price is an overreaction.

“Nevertheless, we recognise a scenario in which these allegations spread to broad parts of the company's current business, and meanwhile a large swatch of the company's management is forced to depart, causing a large disruption to Petrofac's current operations,” said Preston Caldwell, equity analyst with Morningstar.

Vodafone Group (VOD)

In March, Vodafone agreed to merge its Indian operations with Idea Cellular, creating the largest wireless operator in the country and providing lots of opportunities for cost-cutting, said Nichols. The completion of Project Spring should also reduce Vodafone's capital expenditure and improve its free cash flow, Nichols added. The stock is rated as a three-star stock by Morningstar analysts, meaning analysts believe the stock is trading at its fair value estimate. 

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
88 Energy Ltd1.00 GBX0.00
Boohoo Group PLC222.50 GBX1.78
BT Group PLC187.02 GBX-1.04
Carillion PLC14.20 GBX-28.95
Lloyds Banking Group PLC56.72 GBX-0.12
National Grid PLC833.50 GBX-0.16
Petrofac Ltd410.00 GBX1.18
Premier African Minerals Ltd0.04 GBX-11.76
Sirius Minerals PLC15.86 GBX-0.88
Vodafone Group PLC128.34 GBX-0.77

About Author

Karen Kwok

Karen Kwok  is a Reporter for Morningstar.co.uk

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