I’m always on the lookout for stocks to buy that will enhance my portfolio. My focus is generally on value and dividend stocks (which can be the same thing).
Earnings seasons has led to some volatility in markets over the past couple of weeks. Obviously, there’s been other things moving markets, including US jobless data and higher-than-expected PPI.
But volatility does lead to opportunity. That’s why I’m looking to buy more of my favourite stocks and add news ones before the month is out.
So, here are my top stocks to buy before March.
Vodafone
I’ve recently added Vodafone (LSE:VOD) to my portfolio. This wasn’t due to anything related to earnings, but because two telecoms peers invested in the stock, reversing the general downward trend of the share price. e& (formerly Etisalat) upped its holdings in the firm while communications giant Liberty Global purchased a 4.9% stake.
e& and Liberty Global know their industry and I’m sure they know an attractive valuation when they see one. The firm’s share price had fallen over 30% in the year to January but has since gained 10% in a month. Currently, it trades with an attractive price-to-earnings of 10, although that doesn’t take into account the sizeable debt burden.
Investors will also be hoping that Vodafone can generate greater efficiencies moving forward, while extracting more value from existing operations, notably African-focused Vodacom.
I’m a little concerned that the dividend — currently standing at 7.4% — could be cut as coverage only amounted to 1.25 last year. Despite this, Vodafone can still cover an index-beating yield, and that’s why I’ve recently added this stock to my portfolio.
NatWest
NatWest (LSE:NWG) shares slumped last week after the bank announced a 33.5% increase in profits and £800m share buyback as it cashed in on surging interest rates.
The stock fell on concerns about the health of the UK economy and suggestions by some analysts that the company’s interest rate tailwind would unlikely grow further from here. NatWest shares are now down 8% over one week, although they’re up 9% over a year.
However, I think the market overreacted to the results. Amid particularly sticky inflation, I’m expecting this interest rate tailwind to continue for some time. It’s also important to remember that banks have hedging strategies to smooth the impact of rate fluctuations.
Net interest margin (NIM) — the difference between lending and savings rates — rose 55 basis points to 2.85%. I’d anticipate an even higher NIM in 2023, with no sign that central bank rates will fall in the first half of the year.
The bank, which is still 46% owned by the taxpayer, now trades with a price-to-earnings ratio of around 7.8. That’s around half the index average. So, with this in mind, I’m looking to increase my position in NatWest before the end of the month.
