As we head into a new year, I want to follow a couple of investment themes in 2022. I am buying companies for my Stocks and Shares ISA portfolio that fit into these strategies to capitalise on the investment opportunity.
With that in mind, here are the companies and sectors I will be buying in 2022.
Stocks and Shares ISA investments
The first major theme I want to build exposure to is the economic recovery. There are a couple of ways to play this. I can buy companies that will benefit from rising consumer spending, or follow manufacturing and industrial corporations which should benefit from an overall increase in economic activity. I am taking the latter route.
The first company I would buy is Trifast. This enterprise quite literally produces the nuts and bolts of industry. Therefore, it should benefit from any increase in economic activity.
According to its half-year report to the end of September, revenues increased 31% and pre-tax profit jumped 84% year-on-year. Management is also looking for acquisition opportunities to increase the company’s overall footprint, which should help drive growth in the years ahead.
Another industrial company I want to own is Spirent Communications. This business produces telecommunications equipment, particularly for the 5G market. As the rollout of 5G technology continues worldwide, it should benefit from the increasing demand for its hardware.
Rising inflation will be a challenge both of these companies will have to deal with in the months ahead. This could increase their costs and reduce profit margins if they cannot pass the higher charges on to consumers.
Booming market
I will also be building exposure to the resource sector in my Stocks and Shares ISA. As the economy reopens, the demand for essential commodities is rising. This trend is set to continue as governments around the world spend heavily to stimulate their economies after the pandemic.
One of the largest commodity trading companies in the world is Glencore. It helps facilitate the trading of critical commodities from grain to coal and oil and gas across the globe.
This is a low-margin, high-volume business where the most prominent players can take the largest share of the market. As such, Glencore’s substantial global footprint gives it an edge over its peers.
I am also going to buy Rio Tinto. Iron ore prices have jumped over the past 12 months as the demand for the construction material has rebounded. This is creating a highly profitable environment for the company. As earnings surge, I am expecting the business to return substantial amounts of cash to its investors.
The one challenge all commodity companies have to deal with is volatile commodity prices. If the economy suddenly takes a turn for the worse, commodity prices could fall. This could have a significant impact on both firms’ bottom lines.
