Which are the best stocks to buy?

When looking for the best stocks to buy, it's natural to ask your broker what they recommend. They'll probably give you a list of what they believe are the best bets currently, along with a few reasons why. However the opinion of one analyst can often be wildly wrong - not because the analyst is bad at his/her job, but because the world and its financial markets are a complex place!

Share prices go up and down, as do broker ratings and target prices. When many brokers cover a particular stock, there's naturally a range of views to be had and a range of target prices. Now, the price could go up to the highest target price, or down to the lowest, but it's more likely to move (up or down depending) towards the average of all target prices. This is an oft-observed phenomenon because different analysts weigh different drivers differently, so if you average all their individual views you tend to get the market's view.

Whether the average target price is above or below the current price will depend on the extent to which individual brokers are bullish on the stock in question, so a good place to start in trying to find the best stocks to buy would be to find those with no 'sell' ratings, right?!

Well, here they are:

Source: Bloomberg, 13 July

We'll have a look at 5 of the above stocks - the ones that potentially have the best growth potential.

Will travel stock TUI AG (TUI) benefit from a recovery in the pound as markets' nerves are calmed by a new UK prime minister who's in no hurry to put her foot on the Brexcelerator?

Will Shire (SHP) continue to be the destination of choice for the post-23 June safe haven speculators looking for a bit more than just a port in a storm?

Will Worldpay Group (WPG) head back to its post-IPO highs?

Can CRH (CRH) continue to count on the foreign exchange translation benefits due to the weaker Pound Sterling?

Can Carnival (CCL) keep on cruising to new all-time highs?

TUI AG (TUI)

           Source: IT Finance, 14 July

TUI AG (TUI) is a pan-European travel company. The Company operates airlines, travel agencies, cruise ships, resorts, and hotels across the continent. TUI AG (TUI) is Europe's largest tour operator and has been investing heavily in its mass tourism business in the expectation that holidaymakers will seek the implied safety of organised trips due to the increased terror threat in the region.

The company, along with Spain's Air Europa Lineas Aereas,  is currently in talks with US aircraft manufacturer Boeing regarding potential orders worth $3.5bn (Bloomberg, 10 July).

TUI shares are down 19% year to date and will have suffered following the terror attacks at Istanbul airport. Yet they've rallied an impressive 19% since the close on 23 June. TUI AG (TUI) currently has a dividend yield of 4.4% (as at 14 July).

There are 17 broker ratings on TUI AG (TUI). All have targets above the current price - the most bearish price sitting 3% higher - while the average of all targets indicates 33% upside for this stock.

Shire PLC (SHP)

Shire PLC markets, licenses and develops prescription medicines. It's stock is therefore seen as defensive - demand for medicines is not affected in a big way by swings in market confidence or seasonal demand - and it's defensives. The company specialises in treatments for attention deficit and hyperactivity disorders among other, more disturbing physical malades one might see on TV shows like "Embarrassing Bodies".

Shares in Shire PLC are up 3.5% year to date and have managed an impressive 20% rally since the close on 23 June. Shares are currently trading near resistance at 5044p, with a break above potentially seeing a further 14% towards the July 2015 high of 5775p.

There are 23 brokers following Shire PLC, 22 of which are rating the stock as a 'buy.' The most bearish price target is 3% above the current price while the average target price is seeing some 20% upside for the stock (Source: Bloomberg, 14 July).

Worldpay Group (WPG)

Worldpay Group (WPG) is a global online payment processing company. The Company offers technology platforms that enable merchants to accept credit and debit card payments in-store, online, over the phone and on smart phones. Shares have met resistance around 280p and have performed in a lacklustre manner amid consumer confidence wobbles post-Brexit vote.

There are 16 brokers currently following Worldpay Group, 11 of which are rating the stock at 'buy.' The most bearish price target is less than 1% below current levels. However, the average target price is seeing 13% upside from here (Source: Bloomberg, 14 July).

If the price does indeed cover that ground, it would keep in play the sideways channel in which shares have traded since the Worldpay Group IPO in Oct 2015.

CRH (CRH)

CRH (CRH) is a global building materials group. The Company manufactures and distributes a range of construction products value-added exterior products. CRH services a wide customer base spanning residential, non-residential and infrastructure.

Headquartered in Dublin, CRH reports in Euros. Shares are currently trading near all-time highs due to the FX translation benefit of the weaker Pound Sterling following the Brexit vote on 23 June. With Sterling now off its lows, analysts may begin to revise down their bullish outlook. It's worth keeping an eye on CRH shares though - with the Bank of England set to cut interest rates and/or apply more QE in August, the GBP could weaken once more.

There are 27 brokers currently following CRH shares, 16 of which are rating the stock as a 'buy.' A more cautious outlook in this case sees average target price looking for 4% upside from current levels (Source: Bloomberg, 14 July).

Carnival PLC (CCL)

Carnival PLC (CCL) is a dual listed company that owns and operates cruise ships across the world. Say no more. The company has benefitted from the large fall in the oil price and, as is common with heavy users of fuel, has likely seen added benefits from hedging activities on the futures markets. Carnival shares currently have a 2.7% dividend yield.

Shares in Carnival PLC have rallied back above their 200-day moving average after bouncing off the floor of a 17-month rising channel. Falling highs are a concern around 3570p, but if the price breaks above, we could be on for more upside to 4000p and above.

There are currently 13 brokers following Carnival PLC, 9 of whom rate the stock at 'buy.' The average target price is looking for 11% upside which, if covered, could see the price regain late 2015 all-time highs (Source: Bloomberg, 14 July).

Want to know more?

By the time you read this the share prices of the above companies will have moved. That’s why it’s so important you get the information you need when it’s fresh and ideally before the wider market stops reacting. Why not open a demo trading account and have a look at the most recent price data for the above companies – where did shares go based on the factors discussed? If you’ve seen something interesting and would like to discuss it, give us a call and speak to one of our friendly team of traders. We’re always delighted to engage in interesting, thought provoking conversations about the markets.

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