Forget short-term pain! I’d buy these ISA stars for long-term gain

Searching for oversold shares to stick in your ISA? Royston Wild discusses two fallers in which he’d happily invest some serious money today.

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Looking for oversold stocks to spend your new ISA allowance on? Tritax Eurobox (LSE: EBOX) is one recent sinker I think is too good to miss today. It’s fallen 9% in value since pandemic concerns hit crisis levels roughly two months ago.

Like its cousin Tritax Big Box, this small-cap owns and lets large warehousing and distribution hubs to retailers, fast-moving consumer goods (FMCG) manufacturers and logistics companies. The difference is that Tritax Eurobox’s property empire is located not in the UK but across mainland Europe.

The business is, unlike its British relative, yet to report any disruption to its operations following the coronavirus outbreak. Even if it does, any current trouble will prove but a mere fleck on the company’s outlook for the rest of the decade and beyond.

It noted in March: “Structural drivers of accelerating e-commerce growth, automation of omni-channel supply chains, and ongoing urbanisation continue to increase demand for prime big box logistics assets.”

With vacancy rates tumbling and new development activity failing to match demand, Tritax Eurobox looks set to deliver brilliant profits growth in the years ahead. This is why City brokers expect it to recbound from a 22% earnings fall in fiscal 2020 with a 20% rise next year. I’d buy it despite its high forward P/E ratio of around 19 times.

Road warrior

Hill & Smith Holdings (LSE: HILS) is another share market sinker I’d happily buy in an ISA today. The business manufactures safety barriers, signs, gantries and other types of roadside furniture. Its lost a quarter of its value during the past two months, weakness that leaves it trading on a rock-bottom forward P/E ratio of 15.9 times.

This isn’t jaw-droppingly cheap, sure. But it’s a reading which undermines its excellent long-term earnings outlook. Hill & Smith has been a reliable growth generator in recent years because of huge infrastructure spend in its core US and UK markets. A ramp-up of roadbuilding activity has driven demand for its road fixtures, with annual revenues rising 9% in 2019.

But the FTSE 250 firm isn’t having it all its own way right now. On home shores, it’s shuttered around half of its operations in response to the Covid-19 outbreak. It declared back in March that while its US operations remained open, demand there had softened.

Another ISA hero

A prolonged lockdown in these territories could cause havoc for Hill & Smith. City analysts expect these troubles to result in a rare drop in annual profits in 2020. A 15% decline is currently forecasted.

From a long-term perspective though, the engineer’s earnings picture is extremely rosy. It’s why the number crunchers expect the bottom line to rebound 20% in 2021. Crumbling American infrastructure means it’s in great shape to ride a boom in new construction projects.

In the UK, meanwhile, the government published its Road Investment Strategy 2 just a month ago. The plan pledges £27.4bn worth of major road investment and gives Hill & Smith terrific earnings visibility all the way through to 2025.

Like Tritax Eurobox, I’d happily buy this stock market star for my ISA today.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Tritax Big Box REIT. 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.

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