With all the chaos circulating the stock market, investing in UK shares isn’t likely on the top of everyone’s mind. Yet despite the economic turbulence, there continue to be thriving businesses with depressed stock prices.
I’ve spotted two such companies I think could be some of the best shares to add to my ISA today.
A UK stock solving the semiconductor shortage
Disruptions to the semiconductor manufacturing industry are old news now. Yet despite it not getting much attention from mainstream media, the silicon shortage continues to plague the global market. Automakers, smartphone manufacturers and PC component designers are among the sectors suffering from this ongoing issue.
A solution is already underway by simply building more chip-making facilities. And XP Power (LSE:XPP) has been at the forefront of this process, making critical electrical components for semiconductor manufacturing machines. Looking at its 2021 results, revenue from this line of orders alone surged by 46% on a constant currency basis.
Sadly, overall sales and profit growth stagnated in 2021 due to component shortages. And this has understandably frustrated investors, sending the UK stock down 41% over the last 12 months.
With manufacturing lead times continuing to grow, these underwhelming results may continue throughout 2022. That’s obviously not good news. However, the group has more than enough liquidity to weather the storm. And as a long-term investor, these issues look like only a short-term hurdle. That’s why I think the recent stock price tumble is actually a buying opportunity for my portfolio.
A big investment opportunity?
Speaking of stagnating growth, shares of Somero Enterprises (LSE:SOM) have been on a bit of a see-saw ride this year. Yet despite what the stock price would indicate, the business is actually firing on all cylinders.
As a reminder, Somero is a designer and manufacturer of laser-guided concrete laying screed machines. They enable construction crews to pour, smooth, and level concrete in record times with minimal manpower. The end result is a high-quality finish at a significantly reduced cost.
While the stock is listed in the UK, the business operates primarily within the US. And with the Biden administration recently passing a $1trn infrastructure spending plan, management is having little trouble finding new customers for its machines. Looking specifically at its 2021 results, revenue surged 51% to $133.3m, while pre-tax profits climbed by an even more impressive 83%, reaching $44.6m.
Pairing explosive double-digit growth with a stagnant share price often spells opportunity in my experience. But there are risks to consider. While its primary American operations are thriving, activity in the European markets is lacklustre. Due to global logistics disruptions, machine shipments to Europe are getting delayed, potentially opening up opportunities for rivals, especially in Germany, where more competition exists.
Needless to say, that’s not good news for the firm’s international expansion strategy. However, management expects these disruptions to be largely resolved in the second half of 2022. Only time will tell whether this happens. But with impressive cashflows and a dirt-cheap P/E ratio of 8.5, I feel this is a risk worth taking for my portfolio.
