Top stocks for value, income and growth
The UK stock market has enjoyed a strong start to the year, with the FTSE 100 hitting a six-year high earlier this week and the FTSE All-Share hitting its highest ever peak.
Takeover speculation helped the FTSE 100 close at 6369.5 by the end of trading on Wednesday, while the FTSE All-Share was up at 3301.7.
Investors have enjoyed a strong run by holding income stocks - those shares that pay a health dividend - in recent months, which have proved popular because of their defensive nature.
But as confidence in equities continues to rise, investors are starting to look to growth and value stocks, which look cheap. We look at five promising stocks for all three categories that you could consider for your portfolio.
Market data specialists DigitalLook has compiled the following shares using its strategy tool MarketStars.
Income
We wanted to find companies that had not only paid strong dividends in the past, but would continue to provide strong income for the future. The stocks had to have either paid an average dividend of 4% over the past four years or is forecast to do so over the next two years by analysts.
According to DigitalLook, the average stock that met this criteria has returned 19.5%, 82.8% and 208% over a one, three and five year period. Using forecast data the company selected the following companies to perform well in future:
Amstrad
Anglo Pacific
Debenhams
HMV Media
Royal Bank of Scotland
Value
These are stocks that the City has fallen out of love with and were not rated very highly on the stock market as a result. Marks & Spencer and Sainsbury's are two classic value stocks that have since recovered. Both fell out of favour with the City after losing their way, but have since repaired their respective businesses and share prices.
The stocks meeting this criteria needed to have a price/earnings ratio of less than 15, a price/earnings to growth ratio (P/E ratio divided by annual earnings per share growth) of less than 1, a price to book ration of less than 1.5% and a dividend yield of more than 2.5%.
According to DigitalLook, the average stock that met this criteria has returned 28.4%, 88.5% and 184% over a one, three and five year period. Using forecast data the company selected the following companies to perform well in future:
Northern Rock
Antofagasta
Resolution
Investec
GKN
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Growth
These are stocks where earnings and revenue are growing rapidly. The criteria used to search for these stocks includes a 25% increase in revenue and 25% earnings per share growth over the past financial year, plus a 25% predicted growth in earnings per share for the next financial year.
According to DigitalLook, the average stock that met this criteria has returned 24.4%, 54.5% and 201% over a one, three and five year period. Using forecast data the company selected the following companies to perform well in future:
Peter Hambro Mining
Datamonitor
Detica
Aero Inventory
Carter & Carter Group
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