3 UK stocks I own for growth and returns

Sumayya Mansoor explains the reasoning behind her decisions to buy these three UK stocks including pros, cons, and her aims for the future.

| More on:
Young woman holding up three fingers

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

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.

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.

Sumayya Mansoor has positions in Airtel Africa Plc, Auto Trader Group Plc, and JD Sports Fashion. The Motley Fool UK has recommended Airtel Africa Plc and Auto Trader Group Plc. 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.

More on Investing Articles

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

Investing freedom — but inside a pension

Strapped consumers might be cutting back on investing, but they’re still keeping up their pension contributions. The only problem? A…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

Forget gold! I’d rather buy these 3 FTSE high-yielders in a Stocks and Shares ISA

Gold looks like a risky investment to me as the price hits an all-time high. I'm ignoring the fuss to…

Read more »

Young female business analyst looking at a graph chart while working from home
Growth Shares

This 55p UK stock could rise more than 300%, according to a City broker

This UK stock has fallen from above 800p to below 60p. But analysts at Citi believe it’s capable of a…

Read more »

Businesswoman analyses profitability of working company with digital virtual screen
Investing Articles

I think this FTSE 250 trust has all the right ingredients to lock in long-term profits

Today I'm examining the prospects of a private equity investment trust on the FTSE 250 that caught my attention recently…

Read more »

Young black man looking at phone while on the London Overground
Investing Articles

2 under-the-radar UK shares investors should consider snapping up

Two UK shares have caught the eye of our writer. She explains why investors should be taking a closer look…

Read more »

Investing Articles

Are these 2 ultra-high-yielding income stocks a good buy for me?

These two income stocks often split the debate amongst investors. So what does our writer think of them as potential…

Read more »

Senior woman potting plant in garden at home
Investing Articles

5% yield! This dividend stock could be great for my retirement

Our writer explains why this dividend stock appeals to her as she’s investing to build wealth to enjoy in the…

Read more »

A young Asian woman holding up her index finger
Investing Articles

I’d aim for a second income of £1,000 a month with this super-reliable dividend stock

I think a great way to build a second income stream is by investing in dividend stocks via a Stocks…

Read more »