It’s easy to forget about the looming deadline for Stocks and Shares ISAs given what’s happening in the world today. Even so, it’s important for my financial future to remember that whatever of the £20,000 allowance I don’t deposit in my ISA by 5 April is lost forever. Fortunately, I don’t think there’s any lack of candidates right now for where to invest this money.
Let’s not beat about the bush — investors in fast fashion firm ASOS (LSE: ASC) have endured an appalling time of late. Partly due to the rotation away from growth-focused, lockdown winners into value stocks, the share price has tanked 25% in 2022 so far. In the last year, the former market darling’s value has dropped nearly 70%!
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Personally, I see this as an opportunity. ASOS still has many attractive qualities, including a growing portfolio of brands and great international growth prospects.
This is not to say that the share price capitulation isn’t completely unwarranted. ASOS has faced multiple headwinds in recent times, including higher costs and supply chain constraints. The former isn’t exactly great considering margins at this sort of business will never be sky-high. UK-based online clothing retailers have also seen increased competition from overseas rivals such as China-based Shein. Oh, and the big rise in the cost of living isn’t helping any retailer.
Still, I think these concerns are now starting to be reflected in the valuation. At 21 times forecast earnings, ASOS still isn’t ‘cheap’ in the conventional sense but it’s far more attractively priced than it used to be. The move to the main market from the less-regulated AIM might also help to entice new investors.
Assuming inflation will eventually loosen its grip, I consider the £1.75bn cap a firm ‘buy’ for me at these levels. Half-year numbers are due not long after the ISA deadline passes.
A second growth stock I’ve got on my watchlist is XP Power (LSE: XPP). This is a company I’ve actually held within my Stocks and Shares ISA before (and made a very nice profit on). Since then, however, the shares have tumbled.
XPP’s valuation is now almost 30% below where it stood this time last year. Is the actual business really 30% less valuable though? I don’t think it is. XP is a leading developer of critical power control solutions for a number of sectors. Once on board, clients rarely leave. It therefore has a bit more earnings visibility than some in the market.
Speaking of which, it’s worth mentioning this month’s full-year results. Despite multiple headwinds including pandemic lockdowns and component shortages, the company managed to grow revenue by 3% in 2021 (to £240.3m). I think that’s actually quite impressive considering that trade from healthcare customers has inevitably moderated following huge demand in 2020. XP Power also started 2022 with a record order book of £217m.
Having been caught up in the general market sell-off, the shares now trade on 17 times forecast earnings. The 2.8% dividend, nicely covered by expected profit, is the cherry on top.
Like ASOS, I believe XP will recover in time. Of course, there’s no such thing as absolute certainty and the fact that Covid-19 infections in Asia are on the rise again is not great news for this Singapore-based business. Hence, I would never allow my Stocks and Shares ISA to be overly invested in a particular sector, including this one.