Helal Miah (pictured), investment research analyst at The Share Centre, tips five stocks that he thinks are on the verge of recovery, meaning now is the perfect time to buy in to them.Mulberry
Although the £586.4m luxury fashion company has suffered a hit to its share price over the last year, falling from as much as £25 per share to roughly £11 per share today, Miah thinks it has a lot of room to grow.
He says now is the time for investors to pick it up on the cheap.
"It is still focused on the UK and Europe, but even in a weak economy, other luxury goods retailers have increased exposure to emerging markets. Mulberry is not quite there, but it does have plans to do that," he explained.
"If it can be as successful as something like Burberry, we’ll see strong growth in years to come."
The stock has tumbled over the last 12 months, shedding 29.09 per cent. However, over 10 years it has picked up a whopping 1,667.93 per cent compared with just 101.86 per cent and 16.72 per cent from the FTSE 350 General Retailers index and the AIM, respectively.
Performance of stock vs indices over 10yrs
Source: FE Analytics
Stobart Group
Another out-of-favour stock Miah likes is British logistics firm Stobart Group, which was ejected from the FTSE 250 index earlier this year after its share price plummeted.
The £375.4m firm operates trucks, trailers and warehouses around the UK and Miah thinks that improving economic conditions bode well for its performance in the coming months.
"The business has not done too well over the last few years. It’s had troubles managing fuel costs and boardroom issues, but with a general improvement in the economy I expect logistics-based businesses to do well," he said.
Miah adds that one dominant member of its management team has recently left, which has boosted the stock’s share price.
It has lost money over the past one and three years but has come back strongly over the past six months, picking up 16.63 per cent compared with just 0.26 per cent from the FTSE AIM.
Performance of stock vs index over 6 months
Source: FE Analytics
The stock's volatility means it is not for the faint-hearted, but Miah expects it to do well over the medium-term. Stobart also has an attractive dividend yield of 6.5 per cent.
No managers in the IMA universe hold the stock in their top-10.
BHP Billiton
It is certainly no secret that the mining sector has been a tough place to be in the last few years and weak commodity prices in 2013 so far have amplified the pain.
However, Miah says it is time for investors to start thinking about getting back into the sector. He says his preferred method of doing this is through global mining giant BHP Billiton.
"The sector has been pretty beaten up but in the last couple of weeks it has shown signs of recovery. Generally, there has been better economic data out of China and better news out of the European Union. A lot of manufacturing goes on in China, but there are exports to Europe as well," he said.
Miah thinks the stock is good value and the dividend yield of roughly 4 per cent is also attractive for income-seeking investors.
In spite of the recent difficult period for mining stocks, the £42bn company has delivered positive returns over one, three, five and 10 years, although it has underperformed the FTSE 100 in the short-term.
Over the last decade, the stock has picked up 571.24 per cent, compared with a 126.52 per cent gain from the FTSE 100.
Performance of stock vs index over 10yrs
Source: FE Analytics
However, over the last six months the mining firm has lost more than 7 per cent. The index has made 6.1 per cent over this period.
Star managers are still backing the miner, with the likes of First State Natural Resources and Investec Enhanced Natural Resources holding it in their top-10.
Rio Tinto
Along the same theme, Miah likes FTSE 100 miner Rio Tinto.
"Yes there is weakness in the commodity market in terms of commodity prices," he said, "but most of their production is at record levels. These companies have increased production so they’re not getting as much per unit of a commodity they produce, but the capacity is there."
Rio Tinto is currently yielding 3.7 per cent. It has picked up some traction in recent weeks, returning 16.58 per cent over the last month while the FTSE 100 has gained 1.3 per cent.
However, the stock has been battered over the last six months, losing 11.59 per cent – meaning it still represents a cheap way into the sector.
Over the last five years Rio Tinto has had a rough ride, losing 21.26 per cent while the FTSE 100 picked up 46.26 per cent. However, over the last decade it has returned 215.16 per cent.
Performance of stock vs index over 10yrs
Source: FE Analytics
Cazenove’s Julie Dean recently bought the miner for her Cazenove UK Opportunities fund.
BP
Another blue chip recovery stock Miah is tipping is oil and gas firm BP, which was marred by the Gulf of Mexico oil spill three years ago.
However, Miah says this is a thing of the past and the company has set aside enough funds to cover losses from any claims it will incur.
"With the income levels and momentum it’s had in the last year, things are getting better," Miah said.
The stock has underperformed the FTSE 100 index over the last one, three, five and 10 years, returning just 52.43 per cent over the longer period.
Performance of stock vs index over 10 yrs
Source: FE Analytics
The performance has not been any rosier in the short-term either, continuing to suffer losses in recent months.
However, Miah thinks investors who pick up the company now will not only see strong dividends, but strong returns in the long-term.
It is currently yielding 5.4 per cent, which is expected to rise to 5.8 per cent next year.
Nearly 300 funds in the IMA universe count the stock as one of their top-10 holdings, including JOHCM UK Equity Income and Tom Dobell’s M&G Recovery fund.
