Plunging equity markets may not seem like the most appealing place to invest your Isa but if you have a long-term investment horizon this could be an opportunity to buy into great companies at a good price. Picking the right investment is a key part of investing, but buying into it at a good point to benefit from its growth and or dividend stream is also very important, as you won't benefit if you come to the party too late. Tracking down the right companies at the right time is easier said than done, though, so Investors Chronicle's companies team has done the hard work for you and picked out 10 growth, income and value shares they think will deliver the goods.
GROWTH
21 Burberry (BRBY)
The slowdown in consumer demand across Asia, specifically China, Japan and Singapore, has caused chaos for luxury retailers, and British mackintosh maker Burberry has been no exception.
However, the long-term quality of Burberry's brand and operations means the depressed share price could be a buying opportunity despite expectations of falling profitability. Importantly, the company is well aware of the challenges it faces - particularly in Hong Kong - and it has taken several measures to boost trading there. This has included fast-tracking a number of new products into stores, redirecting its marketing campaigns to focus on local consumers, keeping a close watch on operating costs and renegotiating property leases - including the one for its enormous flagship store.
Across all other global territories, Burberry sales are up. At around 1,231p and on a price/earnings ratio (PE) of 15 times the shares aren't terribly cheap, but it's a chance to get into a quality company at a reasonable price. HR
22 JD Sports (JD.)
2016 is shaping up to be another exciting year for high-street chain JD Sports Fashion. Several years of store and infrastructure investment are starting to bear fruit, and this has powered a persistent stream of broker forecast upgrades, which in turn keep pushing the share price higher.
Trading also went extremely well over Christmas, with the company reporting combined like-for-like sales growth of 10.6 per cent over the five weeks to 2 January 2016, which was not the case for all retailers. This prompted JD Sports to tell analysts that expectations for 2016 profits were likely to need adjusting upwards by 10 per cent.
The company is now looking to replicate its success in the UK through a European rollout, which is already producing strong returns despite the tricky consumer backdrop. At 1,130p the shares trade on a PE ratio of 26 times. But we see that as a marker of quality. HR
INCOME
23 Legal & General (LGEN)
Legal & General's improving cash generation should result in impressive dividend growth from its already high-yielding shares in the coming years. A strong performance from its asset management division helped lift net cash generation to £943m in the nine months to the end of September, compared with the £827m generated in the same period a year ago.
The star turn in Legal & General's third quarter came from Legal & General Investment Management (LGIM), which reported net inflows of £21.7bn for the first nine months of the year compared with the net £8.3bn in 2014.
In the UK it has benefited particularly from institutional investors' demand for strategies that spread risk across asset classes, or hedge liabilities.
Legal & General's defined-contribution pension business also offers strong prospects - assets there rose 13 per cent in the first nine months of 2015 to £43bn. Future growth should be helped by the company gaining a place on the defined-contribution platform of one of the major pensions consultancies, Towers Watson, which should generate significant asset inflows.
Legal & General boasts a diverse range of growth opportunities and is also ahead of its target to cut £80m of costs. At the time of writing the company is trading at 222.2p and offers an annual dividend yield of 5.4 per cent. We see this as a great opportunity to buy into a quality income stream from a diversified financial services giant. IS
24 Micro Focus International (MCRO)
Software titan Micro Focus International cashes in on insatiable demand from organisations wanting to modernise ageing mainframes and servers, and to be connected to the latest tablets and cloud-based applications.
Micro Focus is called the 'cash point' for good reason: strong cash generation has allowed it to return more than £554m to investors through dividends, share buybacks and special dividends since March 2011. Its management has halted cash returns as it pays down debt following its transformative takeover of US peer Attachmate in 2014. But that deal has revitalised the company's growth prospects, and cost savings are tracking ahead of expectations.
More importantly, analysts think Micro Focus could return $380m (£271m) in the next financial year, or £1.6bn in the next two years if it sells its open-source SUSE division. Yet the shares still look a bargain – they trade at an unassuming 13 times forecast earnings for this financial year. TM
25 Pennon (PNN)
Those looking for stable income should look no further than utility group Pennon. The regulated nature of its South West Water business means management set out its dividend policy for the next five years from 2015. This means investors can expect increases of Retail Prices Index inflation (RPI) plus 4 per cent until 2020.
Pennon's dividend yield for 2016 is forecast at a healthy Bloomberg consensus of 4 per cent. What's more, Pennon stands to gain a further boost to its income if it delivers on improving the efficiency of its service as a result of new outcome delivery incentives set by regulator Ofwat.
As the only water company to gain enhanced status - which means faster decisions from the regulator - for its 2015 business plan, Pennon has a good operational track record. And what makes the investment case even more compelling is the ongoing recovery of its waste management division Viridor, as it switches from landfill towards energy recovery. Buy for regular returns. EP
26 Primary Health Properties (PHP)
Apart from offering an attractive dividend paid quarterly, Primary Health Properties has one of the safest rental income streams around. Building and then leasing out purpose-built health centres, the rent paid by GPs comes from the Treasury, which is about as safe as it gets.
Furthermore, the business model is virtually immune to cyclical swings because there is a chronic shortage of purpose-built medical centres. And demand for more extensive facilities outside the local hospital will increase in the years to come as improved longevity boosts the number of older people. More government funds are now being made available as a majority of existing GP surgeries are simply unsuitable for expansion, while providing more comprehensive facilities such as X-ray, physiotherapy and minor injuries units will help to ease the workload on hospitals.
PHP is also expanding into Ireland where the health service faces challenges similar to those in the UK. JC
27 Royal Dutch Shell (RDSB)
Royal Dutch Shell's latest full-year results, or at least the key features contained within, could well have applied to just about any of the other oil and gas majors during earnings season. These included a marked contraction in replacement cost profits, savage job cuts and an intensified focus on capital discipline.
However, what the market was really after was reassurance over Shell's ability to fund its existing dividend pay rates. Group chief executive Ben van Beurden confirmed that dividends are expected to be "at least $1.88 per share in 2016", so investor anxieties were allayed - at least over the short term.
Shell's dividend record is exemplary and it has long been the IC's preferred income option in the resource space. We're reasonably confident that Shell will be able to maintain the current rate into 2017, as we believe that oil prices should commence a partial retracement from the third quarter onwards. We also see the integration of BG Group's substantial LNG assets as supportive of the enlarged group's free cash flows over the long run. MR
28 Tritax Big Box REIT (BBOX)
The transfer of retail power from the high street to the internet is unassailable. One by-product of this is that we do ever larger volumes of our shopping via anonymous and enormous distribution centres, which has made so-called 'big box warehouses', also referred to as 'sheds', one of the most sought-after property sectors for real-estate managers.
Tritax Big Box is the best listed shed manager in the game, and has proved itself adept at securing off-market deals to add to its ever-expanding portfolio of distribution centres. The company now has 25 assets with an average unexpired lease term of 16.5 years, and comes with a 4.6 per cent yield based on a share price of 130.4p at time of writing. That is on track to increase along with the value of the portfolio. AN
29 Vodafone (VOD)
Consumers and businesses around the world are clamouring for high-speed 4G wireless and broadband services. That's a positive backdrop for Vodafone, which has more than 450m mobile customers and operates in more than 20 countries. The telecoms titan has bolstered its offerings through acquisitions, and recently launched consumer broadband and TV in the UK. Moreover, expanding and enhancing its networks has helped it amass nearly 30m 4G customers.
Vodafone also continues to thrive in emerging markets and its overall growth is improving: organic cash profits rose 2 per cent to £5.8bn in the six months to 30 September, after three consecutive years of first-half declines. Furthermore, its management recently agreed a joint venture in the Netherlands with Liberty Global that could herald further tie-ups in the UK and Germany with this US cable giant.
The biggest draw of the shares, however, is their prospective yield of 5.2 per cent for this financial year. TM
VALUE
30 Mondi (MNDI)
The panic engulfing equity markets has seen investors indiscriminately dump shares across the board. But some companies are thriving in times of global economic uncertainty, including South African packaging specialist Mondi, which makes everything from hygienic containers and stand-up pouches, to superstrong cement bags.
The company posted operating profit growth of 25 per cent in the year to December 2015. That success was mainly driven by a positive industry supply-demand imbalance, shrewd investments, cost-cutting measures and favourable prices for oil and timber - commodities it uses in abundance.
A major ongoing capital investment programme is expected to continue, generating bumper returns. Mondi's bosses are doing their utmost to capitalise on surging demand for packaging solutions and have a decent track record of delivering on outlays.
But despite being backed by solid structural drivers and a management team known for getting the job done, its shares trade at a discount to peers on 11 times forecast earnings. Income investors will also be heartened by Mondi's strong cash generation and 3.2 per cent dividend yield. DL
See also
10 Investment Trusts for your Isa
