In our previous article on U.K. stocks, we included some fundamentally strong British businesses that most North American investors already are familiar with. Continuing that theme, we'll examine a few more U.K. companies whose stocks might be worthwhile investments. Although the British economy still lags behind that of the U.S. coming out of the recession, many of these U.K. companies operate globally. (Historically, international investing has worked out well for investors, but this no longer may be the case. To learn more, read Does International Investing Really Offer Diversification?)
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Broadcaster in the Sky
Media mogul Rupert Murdoch's son runs British Sky Broadcasting Group (NYSE:BSY). And judging by the numbers, he is a fairly successful captain. British Sky sells pay TV, broadband and telephone service in the U.K. and Ireland. Despite the lingering recession, British Sky is projected to experience robust growth of its 2009 EPS of 97 cents. British Sky's EPS for 2010 is projected at $2.04, while its EPS for 2011 is slated to come in at $2.46. Should you wish to scale these projections back to more conservative figures, the company still has an impressive outlook. British Sky is one of the few purely U.K. stocks we've included. But with its growth prospects and strong, diverse product mix, it's worth considering.
For traditional publisher Pearson (NYSE:PSO), it has become more commonplace to announce its ebook offerings along with or in front of its print material. Extensively involved in consumer, business and education publishing, Pearson is a long-established company that features stability and strong growth prospects. Despite the flat earnings estimates consensus for the next couple of years, Pearson should benefit from the continuing growth of its electronic platforms.
The lodging industry had a terrible year and hasn't bounced back. Intercontinental Hotels Group (NYSE:IHG) hasn't been spared, although the flat earnings projections aren't as disastrous as some. IHG, which describes itself as "asset light," manages and franchises hotels such as Crown Plaza and Holiday Inn. Under its business model, IHG operates rather than owns many of the hotels it runs, which provides it some flexibility in its operations, particularly during this difficult economy. This stock, as with any lodging stock, would be a play to save for when the industry turns around, which may not occur until 2011.
A more solid, less speculative play would be British medical device maker, Smith & Nephew (NYSE:SNN). This company, which operates worldwide and has plants in the U.S., features a nearly 13% earnings growth rate in the next year. Smith & Nephew not only develops its own products, including orthopedic and diagnostic devices, but it also grows through acquisitions. The company recently completed a purchase of Nucryst Pharma, a manufacturer of anti-microbial wound dressing, adding to its product portfolio. Smith & Nephew is a very strong company with a bright future.
The Take Home
Investing in U.K. stocks can round out your portfolio. While many of these stocks are solid, global companies, investors should still exert care in considering them. The strongest evidence to buy remains good fundamentals such as earnings, cash generation and good growth prospects with reasonable valuations. See if any of these stocks match your criteria. (Rather than investing in particular stocks, international ETFs could be a better option. For more information, check out International ETFs.)
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