UK stocks to buy in October
Train, bus and coach transport operator First group (LSE: FGP) said a month ago that bus passenger volumes had reached 65% of pre-pandemic levels. And, at the time, administrators expected a further upturn in volumes as the fall terms for schools and universities “Get fully started”.
A strong recovery in profits announced
Meanwhile, City analysts have forecast a strong recovery in profits for the current year through March 2022. And they expect a higher jump the following year, worth around 170. %. If the company meets these expectations, then profits will exceed the 2019 level.
With a share price close to 91p, the forecast earnings multiple is just above 12 for the year ending March 2023. That is a reasonable estimate to me. However, there is a fair amount of debt on the balance sheet, which could be problematic if we see another economic downturn.
But there is little sign of economic weakness affecting the manufacturer of laser-guided concrete leveling equipment. Somero Companies (LSE: SOM). In September, the company released an impressive half-year earnings report with significantly higher revenue, cash flow and profit.
Catching up with the Covid
Directors believe the progress has been partly due to catching up with customers in projects delayed by the pandemic. Looking ahead, Somero also expects a strong second half. Beyond that, chief executive Jack Cooney said the company was making “Strategic investments to generate healthy earnings and cash flow… in the years to come.“
Meanwhile, shareholders were rewarded with a 125% increase in the interim dividend. And the company has also embarked on a buyback program for some of its own shares. But despite the progress, the valuation seems modest to me. With a share price close to 500p, the expected earnings multiple is close to 12 for 2022. And the expected dividend yield is around 5.5%.
There is some risk that trading in the coming years will slacken once customer workflows are normalized. But Somero has been developing its business for several years and the trend looks set to continue.
Investing in corporate debt
And strong trade for business is good for Blackstone loan financing (LSE: BGLF). The company aims to invest directly in senior secured variable rate loans and bonds, typically representing debts incurred by businesses and other organizations. And it also invests in these debts indirectly through secured loan bond (CLO) securities and investments in loan warehouses. – a CLO is a single security backed by a pool of debts. And the process of pooling assets into a marketable security is called securitization.
In the September semi-annual report, directors said there had been a reduction “deterioration in actual and expected investments and default expectations. And this has led to a positive performance for the company. But going forward, the company is cautious about how the pandemic could play out. However, the outlook for the remainder of 2021 is “optimistic”.
There are obvious risks with this one. This is because the business is exposed to the possibility of other businesses defaulting on their debts. However, I think the valuation helps offset these higher risks. And, of course, the defaults aren’t certain.
With a share price close to 81 euro cents, the price to asset value ratio is close to 0.9 and the dividend yield to shareholders is close to 9%.
Kevin Godbold has no position in any of the stocks mentioned. The Motley Fool UK Recommended Somero Enterprises, Inc. The opinions expressed on the companies mentioned in this article are those of the author and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that considering a wide range of ideas makes us better investors.