3 phenomenal stocks I’m buying for my Stocks & Shares ISA

The market continues to be volatile heading into 2023. But that’s not going to stop me adding these three shares to my Stocks and Shares ISA.

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Nobody can say 2022 has been an uneventful one for investors. All three major US stock indexes plummeted into a bear market. Many high-flying growth shares bombed, causing a fair degree of turbulence in my own Stocks and Shares ISA.

And while the FTSE 100 is set to finish flat, that’s despite two double-digit peak-to-trough rallies in the year. And to top it all, the UK is now in a recession.

Nevertheless, I’m tuning out this noise and planning to add these three stocks to my portfolio in 2023.

Software giant now on sale

Wall Street took a dim view of Adobe (NASDAQ: ADBE) acquiring rival software company Figma for $20bn this year. The stock dived 17% after the acquisition was announced. Despite a rebound since, the shares are still down 40% year-to-date.

At first glance, the sell-off was entirely understandable, considering $20bn equates to paying 50 times Figma’s expected 2022 sales. And this remains a risk, to be sure.

But Figma is a rapidly-growing rival, its collaborative design platform competing directly with Adobe XD. And this is a fast-growing market, driven by an explosion in remote and hybrid working. This deal, which is due to close in 2023, would leave Adobe dominating the user interface design landscape.

The software giant was founded 40 years ago, but it remains as relevant as ever. A lot of the digital economy still runs on its tools and platforms, from Photoshop and PDF, to Illustrator, Acrobat, and Adobe Experience Cloud.

Proving this, Adobe last week reported record Q4 revenue of $4.5bn and fiscal 2022 revenue of $17.6bn. The firm generated a record $7.84bn in operating cash flows during the year. The company boasts an incredible 87% gross margin.

The stock is currently at the top of my buy list.

Building market share

Ashtead (LSE: AHT) is a company aiming to consolidate the fragmented industrial and construction equipment rental market. And it’s had success doing this so far. In fact, the firm is now only second to its US counterpart United Rentals (NYSE: URI) in the North American tool rental industry.

Yet both firms have less than a third of the total market between them. That leaves plenty of open space for consolidation. And that’s why I plan to buy both stocks.

Ashtead and United Rentals have made dozens of bolt-on acquisitions over the last few years. And this hoovering up of smaller competitors has left them in a commanding position. In fact, a duopoly looks to be forming in the European and North American construction equipment rental industry.

These markets are valued at over $84bn, according to Statista. This size is based on the fact that purchasing new operating equipment is very expensive. The option of equipment rental has offered more flexibility and greatly reduced equipment costs.

However, given that the US accounts for over 80% of Ashtead’s total group revenues, any prolonged recession there could threaten growth. That applies to United Rentals too.

Another risk is the amount of debt both firms have taken on to fund their acquisitions. Ashtead’s net debt now stands at over $8bn, while United Rentals debt is over $9bn. That could create challenges given rising interest rates.

Still, I think the long-term opportunity for both companies remains compelling.

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.

Ben McPoland has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

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