3 UK stocks I’d buy TODAY for 2020 and beyond
If you’re looking for stocks to buy today, you have no shortage of options. There’s plenty of value to be found within the UK stock market, despite the fact that stocks have had a good run recently. Below, I list a FTSE 100 stock, a FTSE 250 one, and a high-growth AIM choice that I believe are worth buying today.
FTSE 100 champion
Within the FTSE 100, one stock I like right now is cloud-based accounting and payroll solutions provider Sage (LSE: SGE), which is held by two of the UK’s top fund managers, Terry Smith and Nick Train.
At first glance, Sage doesn’t look that cheap. Looking at the consensus earnings forecast for the year ending 30 September 2020, the forward-looking P/E ratio is 25. That’s considerably higher than the average FTSE 100 valuation. However, given the potential for growth here, I think that valuation is actually quite reasonable.
You see, unlike many other Footsie companies, Sage operates in a high-growth industry. According to Orbis Research, the global cloud accounting market is set to grow at a compound annual growth rate (CAGR) of around 8.6% between now and 2024. Sage also believes its total addressable market is over 70m businesses. Given that it has only 3m customers now, there’s significant potential for growth.
It’s also worth noting that Sage has a strong competitive advantage as it’s an established player within its industry and that it’s a highly profitable company. Overall, I think it’s a great stock to buy today. Remember, as Warren Buffett says, “it’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
FTSE 250 cybersecurity stock
Within the FTSE 250, I like the look of Avast (LSE: AVST). It’s one of the world’s largest cybersecurity companies with over 435m users worldwide.
In terms of big investment themes, it’s hard to ignore cybersecurity. In an increasingly digital world, cybercrime has become one of the most worrying threats to society. According to experts, by 2021, cybercrime could cost the world $6trn annually, which would represent the greatest transfer of economic wealth in history.
Given this backdrop, it’s no surprise that Avast has momentum at present. First-half results last year showed adjusted revenue growth of 9.2% while adjusted EBITDA rose 6.5%.
Right now, Avast shares trade on a forward-looking P/E ratio of 18.1 and offer a dividend yield of a little over 2%. I think that’s good value for this cybersecurity stock.
AIM growth stock
Finally, if you’re looking for growth on the AIM market, take a look at First Derivatives (LSE: FDP). It’s a technology company that operates in the FinTech/big data space and counts the likes of Lloyds Bank, UBS, and Aston Martin Red Bull Racing among its clients.
First Derivatives has grown at a fast rate over the last few years (three-year revenue growth of 85%) and City analysts expect more growth in the years ahead. For the year ending 28 February 2020, revenue is forecast to grow 10%, while net profit is expected to surge 84%. It’s worth noting that the company recently advised that it had “good momentum” across the business at the start of the second half of the year.
FDP shares currently trade on a forward-looking P/E ratio of around 32, which I believe is reasonable for a tech company operating in the high-growth data industry. I think the stock is worth buying today.
Edward Sheldon owns shares in Sage, First Derivatives, and Lloyds Bank. The Motley Fool UK has recommended Lloyds Banking Group and Sage Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2020