I’ve been splashing out on UK growth stocks that I hope will fly back into favour when the recovery finally kicks in. Some have had a bumpy start, but I’m measuring their success in years, rather than weeks.
Sod’s law seems to dictate that whenever I buy a stock, the first thing it does is fall. That’s what happened to home improvement specialist Wickes (LSE: WIX).
I added the £411m group to my portfolio on 13 September, three days after it posted a drop in interim profits. The shares held up on the day, as the board predicted a better second half. With grim inevitability, they fell 6% or 7% after I bought them. So it goes.
I’ll get dividend income, too
I bought Wickes shares because I felt they would benefit from Labour’s plans to ramp up housebuilding, alongside a wider consumer recovery as the cost-of-living crisis faded and the Bank of England cut interest rates.
Personally, I think Labour will undershoot its ambitious house building targets, but still think the economy will pick up.
Homeowners are still reluctant to green light big projects such as new kitchens, which has hit Wickes’ Design and Installation division. But with the shares trading at 11.44 times earnings and yielding 6.29%, I think they’ll prove a great source of growth and income over the longer run.
I love buying top growth shares once the heat has gone out of them, and that’s why I splashed out on JD Sports Fashion (LSE: JD) in January. This was a fortnight after the FTSE 100-listed trainer and trackie specialist had issued a profit warning following disappointing Christmas sales.
Inevitably, the shares fell another 10% or so after I bought them – sod’s law strikes again! – but now they’re flying. I’m already up 35%. Over one year, the shares are up 5.87%.
What we need now is a consumer recovery, both in Europe and the US. That’s not guaranteed, of course. I’ve noted that trainer giant Nike is having a hard time, and as a key JD Sports Fashion brand, that could have a knock-on effect.
Another share for the longer run
However, trading at 12.69 times earnings, the JD Sports Fashion share price still looks good to go. With a yield of just 0.69%, I don’t expect to be lavished with income.
FTSE 100-listed packaging giant Smurfit WestRock (LSE: SWR) looked solid when I bought it in June last year. And once again its shares also crashed within days, after it unveiled a controversial hook-up with US peer WestRock and a dual listing on New York and London. Markets reckoned Smurfit had overpaid to seal the deal, and again, I was staring at a double-digit loss. So it goes yet again.
I responded by averaging down, and I’m glad I did. While the Smurfit WestRock share price has climbed just 3.97% over 12 months, I’m up 24.4%.
I think there’s still value here with the shares trading at 12.67%, plus there’s a solid 3.54% trailing yield.
Again, Smurfit WestRock needs a consumer recovery to power on, while there’s always the risk the merger could misfire or we see a backlash against e-commerce packaging. But I think it will prove its worth over time.
