When searching for great stocks to buy, one of the first places I start looking is what’s already in my portfolio. It’s taken quite a beating over the last 12 months, with the 2022 stock market correction giving no quarter.
But the underlying businesses remain fundamentally sound. And while the short term is still filled with uncertainty and volatility, in the long run, I remain confident.
However, while many of my positions have already begun recoveries, there are still several trading below their estimated intrinsic value. And providing the recent upward momentum seen in the FTSE 100 and FTSE 250 continues, the window of opportunity to capitalise on these potential bargains may be closing.
So let’s explore two companies in my portfolio I’m considering buying more of.
A beaten-down stock
In my experience, some of the best investing bargains are businesses overly punished by investors. That’s a category I’d place XP Power (LSE:XPP) in.
As a quick reminder, the firm designs and manufactures electronic components for machines in the industrials, healthcare, and semiconductor manufacturing industries. Investors were understandably on edge, due to supply chain disruptions that started in 2020.
However, this stock fell from grace after the company was slapped with a $40m legal penalty for stealing trade secrets. Needless to say, that isn’t good. And, unsurprisingly, the share price fell off a cliff.
From a financial perspective, the group has enough capital to pay the fine without crippling its balance sheet. But what about reputational damage? Well, looking at the latest results, it seems customers aren’t too bothered.
The order book continues to grow, and with supply chain disruptions being resolved, XP Power is clearing its backlog. As such, revenues are once again increasing at double-digit rates.
Despite the impressive performance comeback, the shares continue to trade more than 40% lower than 12 months ago. That’s why I believe XP Power is an opportunity to buy while there’s blood on the street. And why I think it could be one of the best stocks to buy and hold in 2023.
Potential tailwind
With inflation hurting household budgets, Howden Joinery Group (LSE:HWDN) may seem like an odd choice in 2023. As a quick recap, the firm designs and sells of fitted kitchens working directly with builders across the UK, Ireland, and France.
It’s hardly the most exciting enterprise. But it’s proven to be immensely lucrative over the years, rewarding patient investors with a steadily rising dividend and buybacks.
Most of the firm’s cash flow originates from households seeking to renovate their kitchens. With consumers looking to cut unnecessary spending, due to the cost-of-living crisis, it would make sense home renovations are likely to be postponed. And yet, that doesn’t seem to be happening.
The latest earnings report announced double-digit revenue growth, with pre-tax profits expected to exceed analyst forecasts. What’s more, performance may be set to accelerate.
With housing becoming more expensive, a new tailwind may start blowing. As families are more likely to stay put for longer, renovation demand will likely increase in the long run.
And while supply chain disruptions continue to pose a threat, the discounted valuation makes it a risk worth taking, in my opinion. That’s why Howden Joinery is number two on my buy list.
