3 UK stocks that could rally in October

Lady researching stocks

Through this year, more and more companies have reported improved numbers after last year’s mini-depression. Typically, these UK stocks’ prices have responded positively to encouraging results. In this article I look at three such stocks that could rally in October. 

Hotel Chocolat share price jumps after results

The first is the British chocolatier Hotel Chocolat (LSE: HOTC), whose share price rallied 11% when it released its full-year results for the period ending 27 June. As a result, its share price rise over the past year jumped by over 40%. And going by the fact that it is still trading below its pre-pandemic levels, I reckon it can continue to rise further, especially if its numbers keep improving. 

The company saw a 70% increase in revenue over last year despite stores being closed or at least disrupted for half the year, supported by online sales. It also swung back into net profit after reporting a big loss last year. I also like that it has ramped up capital investments to increase production capacity, which can hold it in good stead as demand increases further in the future. 

Greggs upgrades outlook

The British bakery chain Greggs also showed an 11% increase in its share price yesterday following the release of its trading update. This amounts to an over 140% rise in the stock over the past year! While its price has subsided in today’s trading, it could continue to rise over time, going by its outlook. 

It now expects full-year results to be ahead of its previous expectations. This follows the 3.5% increase in like-for-like sales in the third quarter of the year from last year, despite staffing challenges as well as supply chain disruptions. It has expanded its products to include vegan foods and drinks and it is also opening more shops. 

Cakebox supported by delivery apps

Cake retailer Cakebox saw an even share price bigger increase than Hotel Chocolat and Greggs of over 12%, when it released its half-year update at the start of the week. For the six months ending 30 September, the company reported a huge 91% increase in revenue from last year. Its sales got a boost from growth in both its own online deliveries and those from third parties like Uber Eats, Just Eat Takeaway, and Deliveroo.  

My concern for UK stocks

My one big concern with all three companies is rising inflation. Greggs has pointed out that food input inflation has increased. Additionally, it also mentions staff shortages and supply chain challenges, which could further fuel price rises. Since all three companies are in the business of food manufacturing and retail, I reckon that they could come up against the same issue. 

What I’d do

However, so far, the popular belief is that this is a short-term phenomenon, that will ease off by the start of 2022. So, I will hold off any concern on the stocks for now. Based on their performance, I think all three are good stocks for me to buy. But Hotel Chocolat looks particularly attractive to me. It is the only one that is still trading below its pre-pandemic levels. It is among the next set of stock purchases I intend to make.

The post 3 UK stocks that could rally in October appeared first on The Motley Fool UK.

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Manika Premsingh owns shares of Deliveroo Holdings Plc. The Motley Fool UK has recommended Deliveroo Holdings Plc, Hotel Chocolat, and Just Eat Takeaway.com N.V. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.