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This was the best performing FTSE 100 stock of 2019

With all of the New Year celebrations now out of the way, it is a good time to look at what to invest in for the coming year. It may sound incredibly obvious, but a good place to start is by looking at what the best performers were during 2019.

It may be the case that there were some flash-in-the-pan spikes that need to be viewed carefully, but there can be merit in jumping on the bandwagon of a stock that did very well last year.

To that end, lets have a look at JD Sports (LSE: JD), which can wear the crown of being the best performing (from a share price gain point of view) stock in the FTSE 100.

The undisputed King

From a price of 349p in January of last year, it rallied hard to finish the year at 837p, with a remarkably smooth uptrend. This was a return of 139%!

When we compare this to the performance of the FTSE 100 as a whole, it really puts into context the size of the move. The index returned just over 12%, meaning JD Sports gave investors over 10 times the performance of the index.

What happened here?

When a stock rallies by this amount, it is either due to one important factor, or many smaller ones. For JD Sports, it was the latter.

Firstly, it has benefited from the fall off in competition, with Mike Ashleys Sports Direct International sorry, Frasers Group as it is now known struggling, as one can see from earnings reports. Further, Ashleys aggressive approach to growing his presence on the high street has not always been the best strategy, as can be seen from the acquisition of House of Fraser. Investors therefore have cycled out of Sports Direct and into JD Sports.

There is plenty of merit to JD Sports without external factors though. The business itself has been able to grow earnings by 49% in the past 12 months, and has a very high gross profit margin of 47%. Cash flow has dried up somewhat, but this can be put down to acquisitions.

JD agreed to acquire Footasylum in March of this year for around 90m, but that deal is still the subject of a CMA investigation. Yet it is the takeover of US chain Finish Line from 2018 that has been a larger boost for 2019. The dampened retail sector here in the UK has been offset by that presence in the US, enabling JD Sports to still grow earnings at a group level.

Still room to grow?

Of 11 analysts offering a viewpoint on the company, the range in share price forecast varies between 680p to 900p, showing that the professionals think further upside could be there, but limited.

Indeed, with a P/E ratio of 31, it is easy to see why some investors may be cautious of buying-in right now, and I would agree. Fundamentally I think the business is sound and will continue to perform both from acquisitions and from picking up business due to the demise of competition. But after the stellar share price rally of 2019, I would wait for a pullback to see the P/E ratio and other financial ratios return to lower figures before investing.

The high-calibre small-cap stock flying under the Citys radar

Adventurous investors like you wont want to miss out on what could be a truly astonishing opportunity

You see, over the past three years, this AIM-listed company has been quietly powering ahead rewarding its shareholders with generous share price growth thanks to a carefully orchestrated buy and build strategy.

And with a first-class management team at the helm, a proven, well-executed business model, plus market-leading positions in high-margin, niche products our analysts believe theres still plenty more potential growth in the pipeline.

Heres your chance to discover exactly what has got our Motley Fool UK investment team all hot-under-the-collar about this tiny 350+ million enterprise inside a specially prepared free investment report.

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Two 6%+ FTSE 100 dividend yields I’d buy for my ISA and never sell

Buying tobacco sharessuch as Imperial Brands (LSE: IMB) and British American Tobacco (LSE: BATS)at present may seem to be a risky move. After all,sales of cigarettes around the world aredeclining, and consumers are waking up to thedamaging effects smoking can have on their health.

However,it appears that many of the risks facing the tobacco industry have already been priced in by investors. For example, shares in Imperialcurrently trade at a forward P/Eratio of just 7.This makes the stock the cheapest company in the FTSE 100. It also suggeststhat there is a wide margin of safety on offerfor investors who are willing toown this deeply discounted blue-chip.

Shares in British American also appear to offer a wide margin of safety.The stock is currently changing hands at a P/E multiple of 10. Itrecently hit a 52-week high on improving investor sentiment.

Major changes

Looking ahead,both of these companies are makingsignificant changes to their business models. Both firms are aiming to cut costs significantly over the next few years to improve profit margins andfree up cash to improve their market positions.

Although both Imperial and British American are struggling with declining sales volumes at their core tobacco businesses, new initiatives such as reduced-risk products, and investments in the cannabis industry show promise.

These initiatives are expected to be a cornerstone of both companies long-term growth prospects over the next few years. Indeed, analysts expect these actions to help British American achieve earnings growth of 13% in 2019 and 7% in 2020. Imperials net profit could rise as much as 140% over the next two years.

Even though the threat of regulatory change could impact sentiment,analysts believe that increased oversight of the sector could actually be good news for both Imperial and British American. More regulations will make it harder for small peers to profit from e-cigarette sales,giving these two tobacco giants a free hand.

As such, while these two tobacco companies may be relatively unpopular stocks in the near term due to the regulatory risks surrounding the tobacco industry, they have the potential to deliver high returns in the long term.

Dividend yields

As well as their low valuations, both stocks offer market-beating dividend yields. The FTSE 100s cheapest company, Imperial, offers investors a dividend yield of 11.1% at the time of writing. British Americans investors are entitled to an income yield of 6.5%.

All in all, while these companies might be facing uncertainty in the near term, I believe they have the potential to deliver high total returns over the long run. Thats why I think they could both be great buy-and-forget ISA investments. In the meantime, shareholders will be paid to wait for the stocks to recover with those market-beating dividend yields.

A top income share with a juicy 6% forecast dividend yield

Income-seeking investors like you wont want to miss out on this timely opportunity

Heres your chance to discover exactly what has got our Motley Fool UK analyst all fired up about this out-of-favour business thats throwing off gobs of cash!

But heres the really exciting part

Our analyst is predicting theres potential for this companys market value to soar by at least 50% over the next few years…

He even anticipates that the dividend could grow nicely too as this much-loved household brand continues to rapidly expand its online business and reinvent itself for the digital age.

With shares still changing hands at what he believes is an undemanding valuation, now could be the ideal time for patient, income-seeking investors to start building a long-term holding.

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Bottoms up to 2020, but is it thumbs down to this UK income stock’s share price?

Equity markets in the UK began 2020 on an ebullient note, with the FTSE 350 up by 0.9% on the first trading day of the year. However, as 2019 faded away, the spirits of the alcohol world in the UK were dampened a bit. In this article, Ill be trying to assess whether this would dampen prospects for Stock Spirits (LSE: STCK) after a brief background.

Data from the Wine and Spirit Trade Association (WSTA) showed that the popularity of champagne and other forms of sparkling wine dwindled in 2019. Sales of premium champagne tumbled by 28% to 13 million bottles last year. These bottles brought in a revenue of 613 million. For comparison, in 2016, over 23 million champagne bottles were sold, which had brought in revenues of 753 million.

Filled to the brim?

It is the change in young peoples drinking habits that has led to the decline as the WSTA sees it. A surge in demand for cheaper options like Prosecco have eaten into the traditional champagne and sparkling wine market, too.

Philip Hammond, former Chancellor of the Exchequer, is also partly responsible for the decline. His increased tax in the 2018 budget, which came into force in February 2019, led to a rise in duty on still wine by 7p and on sparkling wine by 9p a bottle.

Taking Stock of Spirits

Stock Spirits caters primarily to the Central and Eastern European region, with Poland and Czech Republic accounting for over 75% of its revenues. Though its cases sold and sales figures dwarf in comparison to heavyweights like Diageo, it is by no means an insignificant player. It thrives on locally and regionally popular brands.

The factors best in favour of the company include vodka being its mainstay and experiencing growth in terms of both volume and value. Poland being the third largest vodka market in the world certainly helps the company!

However, there are a few causes of concern. 30% of the companys revenue now come from premium products. With both Poland and the Czech Republic proposing a rise of 13% and 10% respectively on spirit sales from January 2020, I cannot rule out a change in customer preferences towards premium products.

Further, Western Gate, while demanding a special dividend in December, had asked for a review of the companys capital allocation policy. The firm, which owns 10% of Stock Spirits, has also expressed concern that its acquisitions Dublin Liberties Distillery Company, Distillerie Franciacorta and Bartida have not contributed to the companys profits in 2019 at all. It further claimed that no returns from these acquisitions may be forthcoming until 2023.

2019 was a sobering year for Stock Spirits share price, which declined by 5%. In my estimation, a possible change in consumer tastes especially due to increased taxation, and concerns raised by Western Gate merit a cautious stance. I think it may be worthwhile to wait a bit, around two to three months, before raising a toast to the stock.

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But heres the really exciting part

Our analyst is predicting theres potential for this companys market value to soar by at least 50% over the next few years…

He even anticipates that the dividend could grow nicely too as this much-loved household brand continues to rapidly expand its online business and reinvent itself for the digital age.

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2 things you should always look for on a balance sheet

The balance sheet is one of the most important financial statements for a company and its investors and yet its one of the financial statements thats often most overlooked.

The balance sheet looks at the financial health of a firm at a single point in time. This means its open for manipulation, as a company can delay paying suppliers until a week after the balance sheet date (thus artificially inflating cash on the balance sheet), but in the end these tricks all come out in the wash.

Being aware of what to look for can save you a lot of money when investing.

Check the quality of assets

Not all assets are created equal. By checking for the quality of the assets you can dig deeper into whats really on the balance sheet. Most private investors wont go into this level of detail so by doing what most private investors dont do you can gain an edge.

Always look at current assets first. These are assets that can be readily deployed, or liquid assets such as cash and inventory. We want to know that the business has enough firepower in its current assets so that it can pay current liabilities and meet its working capital requirements.

We also want to check for the quality of the assets. Its no good a restaurant operator owning plenty of freehold sites where it has units if those units are beginning to look shabby and deteriorating aesthetically. Clearly, theres going to be a lot of necessary maintenance capex needed to be spent on those assets and they may not be worth what theyre said to be worth on the balance sheet. Remember, management has discretion on the depreciation and amortisation of these assets so be careful!

Tangibles and intangibles

Another good check for the quality of assets is to check the tangible and intangible assets. One ratio investors like to use is NAV (Net Asset Value) but what if 80% of a companys NAV is made up of intangible assets?

Now, Im sure we can all agree that The Coca-Cola Company can say that the value of its star brand is worth mega-millions. Its a timeless brand known the world over. But lets say a newly minted plc is saying that the value of its brand is in the millions, yet its only seeing a few hundred thousand pounds in revenue and haemorrhaging cash through losses. Can we really say the same? Just make sure that the balance sheet isnt propped up by poor quality assets or riddled with intangibles.

A good way to do this is to use NTAV (Net Tangible Asset Value).

By using NTAV we get rid of intangible assets and only take into account whats there and whats real. This is an effective and conservative way of checking what a company is really worth and how strong the companys balance sheet is.

A top stock with enormous growth potential

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Not only does this company enjoy a dominant market-leading position

But its capital-light, highly scalable business model has been helping it deliver consistently high sales, astounding near-70% margins, and rising shareholder returns in fact, in 2019 alone it returned a whopping 151.1m to shareholders in dividends and buybacks!

And heres the really exciting part

We think now could be the perfect time for you to start building your own stake in this exceptional businessespecially given the two potentially lucrative expansion opportunities on the horizon that our analyst has highlighted.

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Should you buy Greggs stock now the vegan steak bake is out?

In 2013, Greggs (LSE: GRG) shares were less than 400p. Now, theyre trading not far from 2,400p.

Does that mean we have missed the boat? Well, maybe. Or maybe not. The upside in stocks is theoretically unlimited and as long as a business can keep sustainably growing its earnings, then there is no reason why the stock cant keep going up.

Greggs has benefitted from a national rollout and by providing low-cost food en masse. But whereas Greggs used to be associated with cheap, its image is no longer that of a price-focused baker for those who cannot afford to pay more. Greggs has made huge inroads among more affluent consumers, and has certainly improved the quality of its offering.

In the companys last trading update on November 11, it announced that its own-shop like-for-likes were up 8.3% for the six weeks to November 9 against the previous years comparative period.

Total sales were also up 12.4% in this period. That does not sound like a business that is slowing down.

The release of the vegan roll

Last year, Greggs released the vegan roll a vegan-friendly take on its classic sausage roll. This was an astounding success, with the launch attracting much publicity. Management clearly tapped into an unmet need and has been rewarded with stellar results.

By having the foresight to be ahead of the competition and get a vegan product out there early on, the company has benefitted from a market that had previously been ignored and under-serviced.

Should you buy Greggs stock?

I have previously been a shareholder of Greggs and I bought back in recently. Clearly, the company is doing the right things. The release of the new vegan steak bake shows that management is focusing on the right market, and others are following suit as both Costa and McDonalds announced this month menu changes that will include more vegetarian options.

The company has a strong balance sheet, with net assets coming in at 335.5m.

Receivables stand at just over 23m, with payables slightly above 114m. This is great, because it means Greggs is collecting cash from its buyers a lot faster than it is paying out its suppliers.

If receivables were a lot higher, then this would mean a lot of cash is owed to Greggs that has not actually been paid. Because receivables are much lower in relation to payables, we can assume that Greggs has good cash collection procedures.

High payables is also a good thing for the firm, because what this really means is that cash stays in the business for longer.

The company is growing, and has an eye now on the breakfast market. This is an area where Greggs has been poor but aims to improve this. It is also currently in the process of opening drive-through units.

My personal opinion is that Greggs is a quality company and there is further upside in the share price. However everyone has different investment strategies and risk profiles. But I certainly think anyone could do far worse than considering this stock as an addition to a portfolio.

The high-calibre small-cap stock flying under the Citys radar

Adventurous investors like you wont want to miss out on what could be a truly astonishing opportunity

You see, over the past three years, this AIM-listed company has been quietly powering ahead rewarding its shareholders with generous share price growth thanks to a carefully orchestrated buy and build strategy.

And with a first-class management team at the helm, a proven, well-executed business model, plus market-leading positions in high-margin, niche products our analysts believe theres still plenty more potential growth in the pipeline.

Heres your chance to discover exactly what has got our Motley Fool UK investment team all hot-under-the-collar about this tiny 350+ million enterprise inside a specially prepared free investment report.

But heres the really exciting part right now, we believe many UK investors have quite simply never heard of this company before!

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Forget the top Cash ISA rate. I’d pocket 5%+ here

As we begin the new decade, the outlook for savers remains quite dire. Currently, the top easy-access cash ISA rate is just 1.35%, which is lower than the rate of inflation.

That said, if youre willing to take on a little risk, there are ways to generate a much higher return on your money. Here, Ill explain how its possible to generate a yield of 5% and higher, tax-free, on your money, by investing in dividend-paying companies within a Stocks and Shares ISA.

Boost your wealth with dividends

Dividends are cash payments that companies pay to their shareholders on a regular basis, out of profits. Not all pay dividends (high-growth companies often prefer to reinvest their profits). But here in the UK, plenty do.

For example, well-known FTSE 100 companies such as Royal Dutch Shell, Lloyds Banking Group, Legal & General Group, and GlaxoSmithKline, all pay their shareholders dividends on a regular basis.

Generous payouts

Youd be surprised just how generous many UK companies are when it comes to rewarding their shareholders with dividends. Compared to Cash ISA and savings accounts interest rates, the dividend yields offered by many FTSE 100 companies are amazing.

For example, Shell paid its shareholders dividends of $1.88 per share last year which, at the current share price and exchange rate, equates to a yield of 6.4% nearly five times the top Cash ISA rate. Similarly, Legal & General paid out 16.4p per share in dividends, which equates to a yield of 5.3% at the current share price (analysts expect a higher payout of 17.5p per share for the year that just passed). Meanwhile, Lloyds currently has a yield of 5% and GlaxoSmithKline yields 4.5%.

There are plenty of FTSE 100 stocks that have higher dividend yields too for example, Aviva currently yields 7.1%, while tobacco giant Imperial Brands yields a colossal 11%.

Easy money

But if we keep things simple for now and just consider Shell, Lloyds, Legal & General and Glaxo (which I view as four pretty solid dividend stocks), youre looking at an average dividend yield of around 5.3% nearly four times the top Cash ISA rate.

Split 10,000 across these four stocks, in a Stocks and Shares ISA, and youre looking at dividends of more than 500 per year, tax-free. When you consider that 10K in the top Cash ISA is only going to pay you 135 for the year, 500+ in income from dividend stocks is a pretty good deal, in my view.

Risks to consider

Of course, there are risks to be aware of. For starters, when you invest in shares, your capital is at risk. Share prices move up and down, meaning you might not get back what you invested.

Each company has its own unique risks to consider. Given the volatility of stocks, its generally recommended you invest in shares for at least five years. Secondly, dividends are not guaranteed. If a companys profits fall, the dividend can be reduced, or even cut.

However, when you consider the kind of income stream you could potentially build from a diversified portfolio of dividend stocks, the risks of investing in dividend stocks are very much worth it, in my view.

A top income share with a juicy 6% forecast dividend yield

Income-seeking investors like you wont want to miss out on this timely opportunity

Heres your chance to discover exactly what has got our Motley Fool UK analyst all fired up about this out-of-favour business thats throwing off gobs of cash!

But heres the really exciting part

Our analyst is predicting theres potential for this companys market value to soar by at least 50% over the next few years…

He even anticipates that the dividend could grow nicely too as this much-loved household brand continues to rapidly expand its online business and reinvent itself for the digital age.

With shares still changing hands at what he believes is an undemanding valuation, now could be the ideal time for patient, income-seeking investors to start building a long-term holding.

Click here to claim your copy of this special report now and well tell you the name of this Top Income Share free of charge!


Why I think the Tullow Oil share price looks cheap after falling 75%

The last time I covered the Tullow Oil (LSE: TLW) share price was back in December. The company had just announced its production targets for 2020, which were worse than expected. As a result, shares in the oil producer crashed by more than 75%.

Following thisclanger, the companys investors would have been hoping for some good news to ring in 2020.Unfortunately, Tullowdisappointed its shareholders once more earlier this week.

The company,which was once lauded for its exploration success, announced on Thursday that it had struck oil at its Carapa-1 exploration well off the coast of Ghana. However, the results were worse than expected. Net pay and reservoir developmentfigures were worse than pre-drillestimates.

This new disaster has once again spooked investors. The stock moved sharply lower after Tullow published these disappointing findings. The fact management has had to issue a disappointing exploration update on the first trading day of 2020 doesnt bode well for the rest of the year.

Nevertheless, while it may look like Tullow is struggling at first glance, I continue to believe the stock offers value at current levels.

Value at current levels

Disappointing exploration and production results are all part-and-parcel all of the oil and gas industry. Unfortunately, this has been the norm for Tullow over the past few months. But I think its a mistake to concentrate on its failures.

The company might now be expecting lower production in 2020 than was previously projected. However, even at these lower forecasts, production is still expected to come in between 70,000 to 80,000 barrels of oil per day. Thats a lot of black gold. Whats more,management is anticipating output of 70,000 barrels per day on average for the following three years.

At this rate of production, Tullow is targeting a free cash flow of $150m in 2020, after capital spending. In my opinion, this cash inflow gives the company plenty of headroom to fix its problems. For example, the firm doesnt face any debt maturities until 2021, so its unlikely the business will go bankrupt for at least the next two years.

Offers value

With this being the case,I think the stockoffers value at current levels. While Tullow may no longer be the high-flying oil business it was a few years ago,from a valuation perspective, the stock now looks a lot more attractive.

Based on managements cash flow forecasts for 2020, shares in Tulloware currently trading at a price to free cash flow ratio of 7.7, compared to the oil and gas industry average of nine.Excluding unprofitable businesses, the industry average free cash flow multiple rises to the double digits. As such,now could be a good time for value-seeking investors to buy a slice of the business at a discount price.

A Top Stock with Enormous Growth Potential

Savvy investors like you wont want to miss out on this timely opportunity

Heres your chance to discover exactly what has got our MotleyFoolUK analyst all fired up about this pure-play online business.

Not only does this company enjoy a dominant market-leading position

But its capital-light, highly scalable business model has been helping it deliver consistently high sales, astounding near-70% margins, and rising shareholder returns in fact, in 2019 alone it returned a whopping 151.1m to shareholders in dividends and buybacks!

And heres the really exciting part

We think now could be the perfect time for you to start building your own stake in this exceptional businessespecially given the two potentially lucrative expansion opportunities on the horizon that our analyst has highlighted.

Click here to claim your copy of this special report now and well tell you the name of this TopGrowth Stock free of charge!


2 reasons why the FTSE 100 could hit 8,000 points in January!

For FTSE 100 investors these are exciting times. Following the Santa Rally of late 2019, share picker appetite has remained buoyant and as a consequence, Britains blue-chip index has barged back through the 7,600-point milestone in Thursday business.

The Footsies now just a whisker below the all-time closing high of 7,877.45 hit two Mays ago. And there are a couple of significant reasons why the index could barge to new record peaks in January.

Good news for trade talks

Theres a lot of scepticism still doing the rounds over recent White House reports about a trade breakthrough with China. President Trumps team members have been hitting the airwaves with gusto since mid December to celebrate a Phase One trade deal that had been hammered out with Chinese lawmakers. To the chagrin of many, however, confirmation from Beijing that a deal is ready to be signed is yet to be communicated And on top of this, concerns persist over when the second phase of talks will begin in this US Presidential election year.

Still, the noises coming out of Oval Office are feeding hopes that we could be over the worst of recent trade tensions, while recent comments also contain a bit more detail for optimists to latch onto. President Trump just tweeted that he will be signing a very large and comprehensive Phase One deal on January 15, while adding that at a later date I will be going to Beijing where talks will begin on Phase Two.

This comment, along with others from the Trump administration over the last month or so, clearly doesnt answer all of the questions around issues that could still derail trade talks later in 2020 and beyond. But signs of action between the two superpowers, as per the commander-in-chiefs aforementioned statement, could help the FTSE 100 scale new heights.

Further pressure for the pound?

Its possible that further weakness in the pound could power the FTSE 100 to fresh highs this month too. To repeat, with large groups of companies in the index opting to do their accounting in a foreign currency, their bottom lines benefit from any drop in the pound, and by extension, so do their share prices.

This has been quite apparent in New Year trading, the Footsie marching back towards late Decembers seven-month peaks. The pound has fallen again today, and as I type is down more than half a cent against the US dollar on Thursday as fears over Brexit have resurfaced.

A report just released from the Bank of England underlines the tension over the UKs future relationship with the European Union. According to Decembers Monthly Decision Maker Panel, the number of chief executives at small, medium and large business who expect Brexit uncertainty to persist until at least 2021 continues to rise. At 42%, this is up markedly from the 35% in November who said that they expected the fog to keep lingering in 2020.

This is likely to be a theme that we hear more of in the coming days and weeks, in my opinion, and so further falls in the value of sterling can be expected.

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Forget BT and its 8% yield! I’d rather buy this FTSE 100 dividend stock for my ISA

Its a great time to go dividend hunting with UK plc right about now. Shareholder payouts on these shores have recently hit all-time peaks and the current average yield on offer from the FTSE 100 sits just shy of 5%. Compare that with the pathetic returns on offer from Cash ISAs (where interest rates sit at around 1.5%) or the fast-diminishing profits that buy-to-let investors currently make.

However, some of the probable dividends that Britains blue-chips offer pale in comparison to what City analysts are expecting from BT Group (LSE: BT-A). Sure, the full-year payout is expected to remain unchanged again at 15.4p per share for the current financial period (to March 2020), but such a projection still yields a jaw-dropping 7.9%.

Risky business

Regular readers will know that Im not prepared to countenance buying shares in the telecoms giant myself. A combination of falling revenues and mounting capital expenditure has raised the chances of a dividend cut in the near term, Ive recently argued.

And recent data from Enders Analysis has added to my bearish take, the researcher stating that market revenue growth fell in quarter three to below 1%. It added that growth may drop below zero next quarter as existing customer pricing comes under more pressure. It said pricing for new customers is rising and should continue doing so as the demand and availability of ultrafast broadband rises, though this isnt enough to soothe my current fears. This is why Im happy to keep ignoring BTs jumbo yield and its low rating (a forward P/E ratio of 8.2 times).

A better buy!

BTs share price dropped 20% in the last calendar year, and it has fallen by almost half over the past three years as the bottom line has looked weak and on speculation over a possible cut to the dividend. And as we sit here at the start of 2020, theres no clear reason to expect these concerns to lessen and the companys share value to break out of its tailspin.

Id much rather buy shares in Polymetal International (LSE: POLY), another FTSE 100 firm that boomed 46% in value in 2019. This is a business that looks set to keep rising as a combination of rock-bottom global interest rates, fears over the world economy, plus geopolitical issues like Brexit and tense trade talks keep gold prices on the up-and-up.

The boffins at UBS certainly believe safe-haven demand for the yellow metal should remain robust in 2020. Under their base scenario, they expect that prices will subsequently end the year at $1,635 per ounce up from current levels around $1,515 and for it to remain strong and even end 2021 at $1,650.

Polymetals 4.9% yield might not be as big as BTs, while a forward P/E ratio of 10.2 times also isnt as impressive. Still, these are hugely-attractive values and, unlike the telecoms play, its likely that it will experience another year of heady share price gains in 2020. Its a cast-iron buy in my opinion.

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3 UK stocks I’d buy TODAY for 2020 and beyond

If youre looking for stocks to buy today, you have no shortage of options. Theres 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 UKs top fund managers, Terry Smith and Nick Train.

At first glance, Sage doesnt look that cheap. Looking at the consensus earnings forecast for the year ending 30 September 2020, the forward-looking P/E ratio is 25. Thats 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, theres significant potential for growth.

Its also worth noting that Sage has a strong competitive advantage as its an established player within its industry and that its a highly profitable company. Overall, I think its a great stock to buy today. Remember, as Warren Buffett says, its 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). Its one of the worlds largest cybersecurity companies with over 435m users worldwide.

In terms of big investment themes, its 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, its 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 thats good value for this cybersecurity stock.

AIM growth stock

Finally, if youre looking for growth on the AIM market, take a look at First Derivatives (LSE: FDP). Its 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%. Its 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.

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Femi Ogunshakin Managing Director
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