Should I Buy These 5 Shares?

LONDON -- Shopping for shares isn't easy; there's so much to buy! How's a Fool to choose? Here are five stocks I've added to my shopping basket in recent weeks, but should I take any of them to the checkout?

A very naughty bank
When I asked the question should I buy RBS?, I concluded that investors would be buying a "swamp of uncertainty and mountain of problems," and should only press on if they planned to hold for a long, long time. Shortly after, we learned that Royal Bank of Scotland (LSE: RBS.L  ) was facing a 170 million pound loss, because of its exposure to Spanish housebuilder Rivero y Soler, which has just filed one the largest bankruptcies in Spanish history. I suspect it won't be the last. At the Fool, we like to buy good companies at cheap valuations. Well, RBS is certainly cheap, but it isn't good. It's a bad bank. A very bad bank. Some investors might like that. But it's not for me.

The good ship HL
If RBS is a bad financial services company, Hargreaves Lansdown (LSE: HL.L  ) is one of the good guys. It has performed superbly since listing in May 2007 and is up 50% this year alone. The problem is that its success is now all in the price, trading on an expensive price-to-earnings ratio of nearly 22 times earnings for June. It yields just 2.4%, although this is forecast to rise to 3.8%. With co-founder Stephen Lansdown stepping down and the Financial Services Authority stepping up its financial advice industry reforms, Hargreaves Lansdown does face some uncertainty. I suspect it will sail on regardless, but my gut instinct still says investors have missed the boat with this one.

In a fix
Retail giant Kingfisher (LSE: KGF.L  ) , which owns DIY chains B&Q and Screwfix, has been looking soggy lately, after summer rains washed away sales of garden furniture. I concluded this "isn't a stock to DIY for," and I'm not alone in my opinion. Shortly after, Morgan Stanley downgraded Kingfisher to equal weight, and cut its target from 325 pence to 290 pence. The stock has continued its recent decline, and you can now buy it for 269 pence. On a forecast P/E of 11.8 for January 2013, it isn't even super cheap. And you can beat that 3.3% dividend elsewhere. Its share price could recover if profits rebound as expected next year, but I still can't get excited about this one.

4G or not 4G?
When I asked should I buy Vodafone?, several Fools posted their concerns about the impact of buying 4G bandwidth next year on future earnings and dividends, remembering how Vodafone (LSE: VOD.L  ) borrowed heavily to pay 6 billion pounds to acquire 3G spectrum in 2000. Many investors view Vodafone as a utility, but it clearly isn't free of risk, especially with U.K. politicians already squabbling over how to spend the anticipated windfall. That isn't enough to put me off buying this solid stock, and if 4G does knock Vodafone's share price, that may be a good opportunity to buy more.

How long can a good thing last?
As I discovered when I asked should I buy Aviva?, you can't get away from that whopping 8% yield. Regular Fool LastChip posted the pertinent question: "How long do you think Aviva (LSE: AV.L  ) can continue to post losses and maintain that dividend?", which is only covered 0.7 times, according to Digital Look. And that's not the only uncertainty facing investors. Bad weather this winter, and further storms in the eurozone, could also knock the stock. Although frankly, on a forecast P/E of 6.5 times earnings for December, plenty of bad news is definitely in the price. Yes, that yield could fall. And yes, the share price remains vulnerable. I'm holding at the moment, but I might buy on winter storms.

Five into one does go
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Further Motley Fool investment opportunities:

Harvey Jones owns shares in Hargreaves Lansdown, Vodafone and Aviva. He doesn't hold any other company mentioned in this article. The Motley Fool owns shares in Hargreaves Lansdown. The Motley Fool has a disclosure policy.
We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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