I am always on the lookout for the best stocks to buy now for my portfolio. There are currently macroeconomic pressures as well as reopening issues that I must consider before buying shares.
I have identified two picks I believe could be good additions to my portfolio before the end of 2021.
Before I detail my best stocks to buy now before the end of 2021, it is worth noting the macroeconomic pressures I mentioned.
The UK is currently in the midst of a supply chain crisis. Businesses across the economy have been trying to keep up with the rising demand for products and services. This demand has increased since the end of restrictions. Supply problems are linked to Brexit, rising inflation, and the ability to find the right materials as well as the shortage of HGV drivers. A prime example of a shortage of the correct materials is the shortage of computer chips that are essential to many products, especially in newer electric cars. This has resulted in the used car market seeing a hike in prices.
There is a well documented shortage of workers throughout the UK. The main example that springs to mind here is the shortage of HGV drivers that are needed to help with the supply chain issues across the UK. There has been a huge drive to recruit new HGV drivers and even open the borders to EU drivers to temporarily return to help ease the pressures.
Finally, a rise in costs, especially energy prices that has resulted in record high fuel costs and household energy bills, has hampered the UK economy. Many energy firms have collapsed and you may have seen the rush to fill up cars across forecourts in the UK a few weeks back. Some believe the energy crisis could continue for up to 18 months!
With these issues in mind, I am looking at picks for my portfolio that aren’t affected by these issues or have characteristics to beat them.
The best stocks to buy now have experienced high demand
My first pick is Softcat (LSE:SCT). Softcat supplies IT infrastructure through four core areas. These are cyber security, IT intelligence, hybrid infrastructure, and digital workspace tools. Through its strategic relationships, it sells products and services to public and private sector organisations and has a global footprint.
As I write, Softcat shares are trading for 1,967p per share. A year ago, shares were trading for 1,173p, which is a return of 67%. The Softcat share price has surpassed pre-crash levels by some distance and is currently trading close to all-time highs.
The pandemic saw huge demand for tech products and services. For example, the demand for cloud solutions linked to home working was massive. Softcat benefitted from this and its performance shows that.
Softcat has grown organically throughout the years, expanding into new geographical territories and looking to keep up with the times from a tech perspective. It also has a good track record of performance. I understand that past performance is not a guarantee of the future but I use it as a gauge nevertheless. I can see that revenue and gross profit have increased year on year for the past four years.
Despite my optimism, I must note Softcat does come with risks. Firstly, competition in its industry is rife and intense. It needs to stay ahead of the curve and competitively priced. It also needs to keep its strategic supplier relationships intact to continue its upward trajectory. Furthermore, with shares trading at all time highs, any negative news could cause a share price drop.
Softcat’s full-year results are due early 2022 and I believe all signs point towards another year of growth. This could boost the share price further. In addition to this, Softcat won’t be majorly impacted by the macroeconomic pressures apart from rising costs in my opinion. These costs can eat away at margins but the current high demand for tech products should negate this issue in my opinion.
I would buy shares at current levels and expect to see a lucrative return over the long term.
My second pick is Auto Trader (LSE:AUTO). Auto Trader is recognised as the go to platform for buying and selling vehicles. It offers commercial dealerships as well as private individuals the ability to list cars and these listings reach millions of car buyers across the UK. Auto Trader charges for these listings which is where it makes the bulk of its money.
The primary reason I believe Auto Trader is one of the best stocks to buy now, is due to its place in its respective market. The majority of people in the UK would refer to Auto Trader in their search to buy a new car as well as sell their own car privately. It has a long history and this has built up its brand recognition. It has moved with the times with its online-only presence these days.
As I write, Auto Trader shares are trading for 727p per share. A year ago shares were trading for 554p, which is a 31% return. The Auto Trader share price rose after it released fantastic half-year results earlier this month.
Auto Trader also has its risks too. Firstly, the pandemic saw traffic levels for its app drop substantially. As we enter the winter period and cases of Covid-19 could rise, any further restrictions could hamper progress. In addition to this, the online vehicle marketplace sector has seen many new entrants recently. These new competitors will be attempting to eat in to Auto Traders market share.
Overall I believe Auto Trader is one of the best stocks to buy now from a tech perspective. It has an excellent track record and history of growth as well excellent brand recognition. The shortage of new cars has led to the used car market exploding and the demand for the Auto Trader platform increasing too. It is a rare FTSE stock that is totally debt free which could mean even better returns for an investor too.
I would buy shares for my portfolio before the end of 2021 as I believe its upward trajectory will continue in 2022 and beyond.
Jabran Khan has no position in any shares mentioned. The Motley Fool UK has recommended Auto Trader and Softcat. 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.