Let me give you an insight into why I bought three UK stocks I currently own.
They are Airtel Africa (LSE: AAF), Auto Trader (LSE: AUTO), and JD Sports Fashion (LSE: JD.).
Exciting growth play
Airtel Africa is a growth stock that was catapulted to the FTSE 100 a couple of years ago.
It offers mobile and data plans, and mobile money services, which means accessing mobile banking and payments services on smartphones in Africa.
The exciting aspect for me is the fact there seems to be a lot of room for growth. Over 50% of people in Africa don’t own smartphones yet.
Airtel has already managed to establish itself in 14 countries, and has managed to rack up an excellent market position in nearly all of these territories.
A great run of performance and investor rewards has helped boost investor sentiment. The shares currently offer a dividend yield of 4%. However, I’m conscious dividends aren’t guaranteed, and past performance is not an indicator of the future.
From a risk perspective, investing in a business that is operating in a volatile geopolitical and economic region can have its drawbacks. Conflict could hurt performance, returns, and sentiment. More recently, currency fluctuations in one of its biggest markets, Nigeria, hurt its bottom line and balance sheet.
Established industry leader
Online vehicle marketplace Auto Trader is the brand synonymous with buying and selling vehicles in the UK. The business has been around for an age, and has developed from a paper-based magazine released once weekly, to the current online app.
The business has an excellent track record of performance, and the biggest market share in the industry by some distance. A yield of 1.5% isn’t the highest, but is consistent and could yet grow. This is largely due to the firm’s brand power and loyal customer base.
One risk is the current cost-of-living crisis. A softening car sales market could impact the firm’s performance and return level, at least in the short term.
Finally, the shares currently trade on a price-to-earnings ratio of around 27, which could be considered a premium. However, I do understand that for the best businesses out there, you have to pay a fair price.
Cheap again with room for growth
The business has risen from humble beginnings to become a FTSE 100 behemoth. Its growth story, track record, and brand power are enviable, in my opinion.
The business has capitalised on the growing casual and sporting fashion market exploding to dominate the UK market. It recently began to target overseas expansion, which is what I’m excited about.
However, JD shares have struggled a bit recently. A big part of this is global economic volatility, driven by higher interest rates, and inflationary pressures. This particularly hurt the business in North America. I’ll keep an eye on this continued pressure and JD’s performance.
However, the good news is the shares look cheap again after falling back a bit, trading on a price-to-earnings ratio of around nine. I might be tempted to buy some more shares as soon as I can.
I reckon once the economic picture is better, JD is the type of business to flourish. Plus, a dividend yield of 1% helps me build my additional income stream through dividends.
