2 UK shares I’d buy before the stock market rallies

The rising volatility in the market has created many share-buying opportunities for UK investors. Zaven Boyrazian explores two of these.

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There’s an increased level of volatility in UK shares at the moment. While the FTSE 100 has been climbing in the right direction, the same cannot be said for all high-growth stocks over the last couple of months. Yet, the drop in price for some of these businesses could be the perfect opportunity for me to snatch up some shares at a discount before they recover. Let’s explore two of these opportunities.

A credit data giant

Shares of the UK credit data provider Experian (LSE:EXPN) have had a fairly rough time lately. Its 12-month performance is still up by 13%. But since the start of 2022, the stock has dropped like a stone by 20%.

As growth stocks lose their favour with investors, high-flying UK shares like Experian are the first to get hit. And it’s possible that further price declines could be on the horizon. Why? Because even after the disappointing performance seen so far this year, the shares continue to trade at a price-to-earnings ratio of 38. And that leaves the door open to further volatility.

But despite the direction of the share price, the latest earnings report from management was quite encouraging. Revenue in its third-quarter grew by 15% on a constant currency basis versus a year ago. As a result, revenue growth is expected to be around 16-17% for its full fiscal year ending in March. 

That looks promising to me, especially since most of the growth originates from organic sources. That’s why I think the recent tumble is a perfect buying opportunity for my portfolio, despite the valuation risk.

A UK growth share that’s lost a lot of love

The pandemic has enabled the gaming sector to rapidly accelerate its growth. Renewed forecasts now expect the market opportunity to reach nearly $240bn (£179bn) by 2026. With that in mind, I think it’s easy to see why investors got excited by the growth prospects of Frontier Developments (LSE:FDEV) in 2020.

Unfortunately, the UK firm’s recent financial performance has caused a 60% decline in its share price over the last 12 months. The PC launch of its latest title, Jurassic World: Evolution 2, didn’t meet sales expectations, despite it receiving critical acclaim. As a consequence, management cut guidance, and shareholders had a bit of a meltdown.

This reaction wasn’t too surprising to me. Like many growth stocks, investor excitement had pushed the valuation to fairly lofty heights. But I think investors may have gone from one extreme to another. The studio has a long line-up of new titles coming out in 2022 and 2023, including games for popular franchises like Formula One and Warhammer. Combined, these soon-to-be-released projects could deliver enormous long-term growth, making the recent short-term issues less important. Therefore, while Frontier does carry more risk, I’m considering adding some more shares to my portfolio 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 considered so you should consider taking independent financial advice.

Zaven Boyrazian owns Frontier Developments. The Motley Fool UK has recommended Experian and Frontier Developments. 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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