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Let's be honest, no one can predict the future when it comes to UK stocks, or any other stocks.
However, I can use the information available to make an informed prediction about which stocks might perform well in the future.
Two actions that I believe will do this are: HSBC Bank (LSE: HSBA) and Michelmersh brickworks (LSE: MBH).
I would buy both stocks if I had some cash to invest today. Here's why!
HSBC Bank
The Asia-focused banking powerhouse looks to be one of the most attractive banking stocks on the FTSE right now.
The business, with a market capitalisation of £120bn, has a stellar market position, a strong presence in over 60 countries and a strong track record. However, I am more interested in the future than the past.
HSBC’s entry into the lucrative Chinese market is exciting. This region, where wealth levels are projected to grow exponentially in the coming years, is one where HSBC already has an established presence. In my view, profits and returns could soar.
The obvious risk is economic headwinds. A clear example of this has been the recent growth struggles in the region, which in turn have undermined global economic equilibrium and slowed the progress of many markets. However, this is a cyclical risk that I am willing to live with when it comes to bank stocks such as HSBC.
Continuing with my bullish argument, the stock offers a very attractive dividend yield of over 7%. To put this into context, FTSE 100 Index The average is 3.6%. However, I understand that dividends are never guaranteed.
Finally, the stock appears to be excellent value for money, with a price-earnings ratio of just 6.9.
Attractive fundamentals, a potentially exciting future ahead and an established brand and business – who wouldn’t want that?
Michelmersh brickworks
Far removed from the fast-moving world of financial services lies Michelmersh Brick Holdings, a company dedicated to the creation and sale of bricks, tiles and other construction projects.
Michelmersh may not have the brand and power of HSBC, but it has a lot going for it. First, it makes its own products, which can help set prices, power and operating costs.
From a future perspective, demand for bricks and construction aggregates will only increase, especially in the UK. The housing imbalance, as well as the need to build infrastructure for the UK's growing population, could catapult Michelmersh's earnings and returns to higher levels.
In terms of profitability, a dividend yield of 4.7% is attractive. In addition, the stock appears to be a good value with a price-to-earnings ratio of just 11.
The risks for Michelmersh are economic turbulence from two different perspectives. The new government has spoken of a financial black hole, which could mean infrastructure projects will be put on the back burner. Another problem is inflation, which could hamper profitability and demand. These aspects could dent profits and returns, as well as growth.
Overall, I think Michelmersh is a bit of an understated gem compared to more established names operating in the so-called more glamorous industries.
