As the markets struggle and investors fret about inflation, Chinese economic growth and the impact of the hasty and disorganised withdrawal from Afghanistan, there are, in my opinion at least, opportunities to pick up top British stocks.
Top FTSE 100 British stocks
From the UK’s elite index – the FTSE 100 – I’d buy Legal & General (LSE: LGEN) and Aviva (LSE: AV). Stable business models and decent value share prices underpin the buy case for both of these shares, for me. Both also seem to be doing a lot right.
In the case of Legal & General, there’s the high dividend yield and the fact the dividend was maintained through the pandemic. Unlike at other financial companies, including rival Aviva.
It also has an incredible passive investing business and has built up a large annuities business as well. To me, it seems very well run and the management team is experienced and very stable. The CEO has been in the role since 2012.
Aviva has until recently been more turbulent. The CEO role has been in several hands in quick succession. But under Amanda Blanc, the business seems to be doing much better. It has become leaner, which should make it more efficient and easier to manage, and the dividend is making a comeback.
I already own shares in Legal & General and would be happy to buy more when the price dips to hold for the long term. Share buybacks and the possibility of special dividends at Aviva also mean I’m considering adding some of its shares to my portfolio.
The risk with Legal & General is whether the dividend can keep growing. With Aviva, it is can the insurer grow sufficiently now it is concentrating its business just on the UK, Ireland and Canada? I think it’s too early to tell just yet.
Best of the rest
Outside of the FTSE 100, there are plenty of smaller businesses I also like. There are three in particular: Property Franchise Group, TinyBuild and Cerillion.
The former is similar to Belvoir, providing letting management, new-house-builds, as well as property-related financial services. It has a £100m market capitalisation and I think could grow for years to come, except if there’s a serious and prolonged UK residential property correction. It’s likely to be added to my portfolio in the next month or two.
TinyBuild is a newly-listed gaming company. The shares have done OK since listing in March. Gaming remains a high-growth industry. I expect, therefore, that the shares can do well. The CEO holds about 38% of the shares, so is well incentivised to grow the share price and manage the company for the long term.
The possible downside is that like other gaming companies, the shares are expensive on a forward P/E of 48. Any bad news could see the stock hit hard. But the CEO stake makes me tempted to buy the shares.
Lastly and just a quick word about customer relationship management software group Cerillion. It’s a high-return, high-margin business and unusually for a tech stock, it pays a dividend. Again though, the shares aren’t cheap and for that reason, while I think it’s a great company, I won’t be buying the shares for now.
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Andy Ross owns shares in Legal & General. The Motley Fool UK has no position in any of the shares mentioned. 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.
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