With all the stock market volatility in 2022, there are countless buying opportunities for eager investors with £3k and a Stocks and Shares ISA to capitalise on. Here are three promising investments that are seemingly firing on all cylinders, despite the economic headwinds.
1. Revamping business banking
Alpha FX Group (LSE:AFX) is a rapidly expanding fintech enterprise. It helps businesses hedge against foreign currency fluctuations while simultaneously providing an alternative banking suite. While the latter service remains relatively new and a small part of the overall revenue stream, it’s proven to be immensely popular among clients.
According to the group’s October trading update, the rising interest rate environment, paired with a spike in forex volatility, has created some massive tailwinds. So much so that management now expects profits to come in higher than expected, even after raising guidance earlier this year.
But, unsurprisingly, this strong performance comes paired with a fairly lofty valuation. With a P/E ratio of nearly 35, the stock can hardly be described as cheap, introducing additional investment risk in a Stocks and Shares ISA. Nevertheless, the continued double-digit growth in revenue and earnings could be well worth the premium.
2. Playing the gaming theme with UK shares
Keywords Studios (LSE:KWS) is a technical and creative service provider to the video game development industry. Working alongside leading studios worldwide, Keywords provides the bulk of the talent required to design, create, and test new games.
2022 has been quite an eventful year for this business, with revenue and earnings surging by 32% and 28% respectively. While consumer spending might be under fire from inflation, demand for video games seems largely immune and is still growing. In fact, management now expects 2022’s strong momentum to continue well into 2023, pushing results to the higher end of current expectations.
At the heart of this impressive growth lies Keywords’ acquisition strategy. The firm is constantly executing bolt-on purchases of smaller service studios to bolster and expand its long list of services. But acquisitions don’t always go smoothly. And a series of underperforming deals could saddle the balance sheet with expensive debt – even more so now that interest rates are rising.
So far, management has demonstrated its ability to find value-adding deals. And providing that doesn’t change in the future, this stock could be a lucrative addition to a Stocks and Shares ISA for 2023 and beyond.
3. Renovating an ISA
With the cost of living rising, many home renovation projects are being put on hold. Or at least that’s a commonly held opinion. Yet looking at Howden Joinery (LSE:HWDN), it seems someone forgot to tell them.
The group is a designer and supplier of fitted kitchens working directly with tradesmen. With a vertically integrated business model, its supply chains have proven quite resilient to disruptions these past couple of years. And even with the economic slowdown creating headwinds, sales in the UK and internationally are up by double digits. In fact, management now expects its 2022 pre-tax earnings to beat analyst consensus.
The continued economic uncertainty undoubtedly elevates the risk profile, especially if the UK falls into a deep recession. But given its resilience so far, and that demand for kitchens isn’t likely to disappear in the long term, Howden Joinery looks like a great stock to buy for patient investors.
