A Stocks and Shares ISA is a great way for me to invest in a tax-efficient way. The £20,000 annual allowance means I can buy stocks without paying capital gains tax if I sell them for a profit. Recently, though, it’s been hit hard for a variety of reasons. I’m very much in the red, so let’s see what I’m doing next.
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Three recovery stocks
Generally speaking, my investments are geared towards pandemic recovery. While the worst of the pandemic is over, problems such as inflation remain. The war in Ukraine has also driven up energy costs and there’s the cost-of-living crisis.
To that end, I’m not concerned that my stocks haven’t yet rebounded, because the world is still recovering.
The individual companies I added to my portfolio in 2020 were Rolls-Royce, IAG, and Cineworld. All three are down in the past year.
| Stock | 1-year share price performance | Performance since purchase |
| Rolls-Royce | -12.84% | -15.7% |
| IAG | -39.54% | -15.44% |
| Cineworld | -77.62% | -66.25% |
Both Rolls-Royce and IAG – a jet engine manufacturer and airline conglomerate, respectively – have suffered cash flow problems due to the grounding of aircraft.
While the threat of further pandemic variants remains, IAG’s passenger capacity has improved markedly and Rolls-Royce’s civil aerospace flying hours are up over 40%. Based on these results, I’m fairly confident these stocks will come good over the long term.
Elsewhere, Cineworld had to shut all its cinemas due to pandemic restrictions and sank to a £3bn loss in 2020. Now, cinemas are open again and there’s an exciting film slate this year.
That doesn’t take away from the fact that all three are down since I bought them.
How I’m responding
Seeing red in my investments necessitates controlling my emotions and the natural urge to sell. I bought these companies for a recovery and I intend to stick to my plan.
This is where the strategy of having cash on the side really becomes important. Because I think my stocks will perform over the long term, I’m happy to add to my positions at these low levels. This enables me to lower my average price. Steadily buying more shares on market dips can be really beneficial over a long period of time.
Having spare cash also means I can be on the lookout for other exciting companies to pick up at lower prices. One such firm I’m closely following is Pantheon Resources, an Alaska-based oil exploration business.
After recent drilling and analysis, the company believes it has oil-in-place equivalent to 23.5bn barrels. Given the high oil prices recently, this could be very good news if it manages to recover even 10% of this find.
It’s always possible, however, that exploration and recovery yields are less than anticipated.
Overall, I’m using this broader market downturn to add to my existing positions. Furthermore, I’ll buy Pantheon Resources for potential growth over the long term. In so doing, I will bolster my entire portfolio and hopefully reap the rewards when the stock market hits calmer waters.
