Buy the dip! 2 stocks I’m adding to right now

With the recent market sell-off, should I buy the dip and add to my IAG and Boohoo holdings?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Key points

  • The recent market sell-off may be providing good buying opportunities
  • IAG’s losses narrowed significantly for the 2021 calendar year
  • Boohoo has a compound annual EPS growth rate of 31.8%

The escalating military conflict between Russia and Ukraine is continuing to appal the world and to negatively impact share prices. In particular, many companies operating in Russia have suffered. Evraz, a steel firm, is down 59% in the past week and 88% in the last year. Polymetal International, a gold miner, has fallen 73% in the past week and 87% over the past year. The move is much wider, however, with the FTSE 100 down 0.5% at the time of writing. This has prompted me to think about buying the dip. International Consolidated Airlines Group (LSE:IAG) and Boohoo (LSE:BOO) are two companies I currently own and I’m thinking of adding to. Let’s take a closer look.

Buy the dip: the travel recovery

Down 16% in the past week and 42% over the last year, the IAG share price has only been heading one way. It’s currently trading at 112p. For the 2021 calendar year, however, the company’s results were quite positive. Losses narrowed significantly to €2.7bn from €7.4bn in 2020. Furthermore, revenue over the period increased by just over 8%.

These results suggest that the firm is starting to benefit from the reopening of borders and resurgence of international travel. Given the recent sell-off of IAG shares, this could be a perfect time for me to buy the dip.

It should be noted, however, that any future variant could be a stumbling block for the recovery of international travel. In addition, rising fuel prices mean the cost of jet fuel will also likely rise in the near future.

Furthermore, Q4 2021 capacity increased to 58%. This was just 21.9% in Q2. As many more countries begin opening their borders and removing all pandemic-related restrictions, I think the future is bright for this airline industry giant.  

A cheap growth stock

Similarly, Boohoo shares have fallen 14% in the past week and 78% over the last year. It currently trades at 65p. For the years that ended in February, from 2017 to 2021, earnings-per-share (EPS) grew from 2.23p to 8.89p. By my calculations, this results in a compound annual EPS growth rate of 31.8%. This is both impressive and consistent. I think it makes sense for me to buy the dip at the moment.

Furthermore, revenue over the same period increased from £294m to just over £1.7bn. This is a strong indication that Boohoo is growing quickly. That said, in an update for the three months to 30 November 2021, expected profit margins fell by around 2%.

Shares in this company may also be cheap. With a forward price-to-earnings (P/E) ratio of 15.02, this is lower than ASOS, a major competitor. ASOS has a forward P/E ratio of 22.99. This could suggest that I would be getting a bargain.   

The recent sell-off provides me with a great opportunity to buy the dip. IAG has great potential as the world reopens and Boohoo displays strong growth. I will be adding to my current holdings of both companies. 

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.

Andrew Woods owns shares in IAG, boohoo and Polymetal International. The Motley Fool UK has recommended ASOS and boohoo group. 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.

More on Investing Articles

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »

Investing Articles

3 ideas to help investors aim for a million-pound Stocks & Shares ISA

The UK has a growing number of Stocks and Shares ISA millionaires, and this plan may be one of the…

Read more »

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »