The Share Centre’s Graham Spooner says many companies could post better-than-expected results on the back of the good weather and could continue to flourish as long as the summer holds out.
Here, Spooner (pictured) highlights five stocks that he believes could be set to benefit from a summer boom.
Britvic
Spooner likes Hemel Hempstead-based soft-drinks producer Britvic, which he thinks will benefit from the summer heat.
"With summer finally upon us, beverage sales could rise as the public fight to quench their thirst," he said.
"The beverage sector is generally suitable for medium-risk investors due to its highly consolidated nature, and Britvic certainly has the potential to benefit from these sunny spells."
"As parent to a vast portfolio of brands including Robinsons, Fruit Shoot and J20, and also owning the Pepsi and 7UP UK franchise, Britvic appears to have all sub-sector bases covered. What’s more, with Robinsons' sponsorship of a successful Wimbledon helping attract an additional 789,000 households to the squash category, Britvic’s share price has steadily risen."
The £1.3bn company is currently the number-two soft-drinks producer in the UK and is a constituent of the FTSE 250 index.
While the stock has lagged both the FTSE 250 and FTSE 350 Beverages indices over three years, it has roared ahead over the last 12 months, picking up 82.65 per cent. The FTSE 250 is up 37.1 per cent over this time, while the FTSE 350 Beverages index gained a mere 18.59 per cent, according to FE Analytics.
Performance of stock vs indices over 1yr
Source: FE Analytics
It is trading on a price/earnings (P/E) ratio of 16.1 per cent and is yielding 3.5 per cent. This is down from a 4.9 per cent yield last year, but is expected to rise to 3.7 per cent in 2014.
Restaurant Group
Another mid cap stock Spooner is backing is the £1bn Restaurant Group, one of the largest independent restaurant groups in the UK.
He says the London-based firm owns strong brands such as Frankie & Benny’s, Chiquito and Garfunkel’s.
"Sales are 11 per cent ahead of last year’s and the group is targeting an additional 30 to 35 new expansion sites this year," he said.
"Situated mostly in out-of-town complexes, dense urban areas and airports, the Restaurant Group is well positioned to reap the summer indulgence rewards. Alongside the rising temperature, the Restaurant Group’s share value has climbed."
The stock has also performed well over the long-term, beating both the FTSE 250 index and FTSE 350 Travel & Leisure index substantially over five and 10 years, as well as over the short- and medium-term.
Over the last decade, the stock has picked up a whopping 930.87 per cent while the FTSE 250 and FTSE 350 Travel & Leisure index have made 270.98 per cent and 195.79 per cent.
It is trading on a P/E ratio of 19.8, with a yield of 2.5 per cent.
Halfords
"As the UK’s leading retailer in car parts, bikes and accessories, Halfords is set to take advantage of the summer period," Spooner said.
"Both weather and sporting events such as the Tour de France can impact company prospects, reflected in its somewhat erratic figures of late due to the wet start to the year."
"However, the recent heatwave is self-evident as families rush to take full advantage of UK holiday sun. Should it continue, it may be good for Halfords."
The firm, which is based in Redditch, had a difficult period over the past three years, losing 12.9 per cent. However, it has rallied over the last 12 months, gaining 98.67 per cent while the FTSE 250 index has made 37.1 per cent.
The FTSE 350 General Retailers index made 60.41 per cent over the period.
Performance of stock vs indices over 1yr
Source: FE Analytics
It has also racked up some healthy gains while the rest of the country has been enjoying the summer weather, more than doubling the returns of both indices over the last month.
Halfords has a yield of 5.3 per cent and is trading on a P/E ratio of 15.9.
Young & Co’s Brewery
The growing number of people standing on sunny street corners with a pint in their hand is why Spooner thinks Young & Co’s Brewery, which operates nearly 220 pubs across the UK, will benefit from the pleasant weather.
"With a slow start to the year due to the poor weather reported in the sector, Young & Co's, one of the UK’s leading independent pub retailing businesses, will be hoping to capitalise on the summer weather," he said.
"Having a strong, London-based focus, Young & Co’s well-managed approach targets a more affluent market, acquiring a further three freehold pubs in the capital within the last month."
The £278.9 brewery is trading on a P/E ratio of 19.8 and is yielding 2 per cent.
The brewery has delivered returns well ahead of the FTSE 350 Travel & Leisure index over one, three, five and 10 years, picking up 463.3 per cent over the longer period. The index made 195.79 per cent.
Majestic Wine
Following the trend of Britons enjoying a drink in the sun, Spooner says wine retailer Majestic Wine stands to benefit this summer.
"Majestic also suffered a slow start due to the weather. However, the company is expecting a promising summer, especially in sparkling wine demand. Reducing the minimum online order to six bottles in June last year boosted sales," he said.
"Holding a list of well-positioned stores and a popular format with its customers, Majestic has plans to add another 140 stores to its portfolio, offering favourable prospects to investors."
Majestic Wine is yielding 3.5 per cent and is trading on a P/E ratio of 15.8 per cent.
The company has posted strong gains relative to the FTSE 350 Beverages index in the short-term, returning nearly four times as much as the index over one, three and six months.
It has also outperformed over three and five years, but underperformed over 10 years, returning 299.57 per cent while the index is up 487.39 per cent.
