As October’s payday approaches, I’m thinking about what to do with the cash I’ll put aside for investing. And there seem to be quite a few opportunities in terms of shares to buy.
Despite the S&P 500 as a whole being expensive, I do think there are some US stocks that look attractive right now. But the shares that stand out to me the most are largely in the UK.
J.D. Wetherspoon
J.D. Wetherspoon (LSE:JDW) is in an odd position. Sales have been rising, costs have been falling, profits have (therefore) been going up, but the share price keeps going down.
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There are a few possible reasons for this. One is there are inflationary pressures on the horizon and another is the potential for increased taxes and/or regulation in the upcoming Budget.
As I see it, though, there will always be reasons to be wary about the business. But the reasons for optimism – in my view – are a lot stronger.
J.D. Wetherspoon’s strategy involves keeping its own costs low and passing on savings to customers through lower prices. This is a model that has worked well for the likes of Costco.
The business isn’t just about rewarding customers, though. Investors benefit from a competitive position that strengthens every time the gap between its prices and those of its rivals gets wider.
I’m ambivalent about the fact the company is about to start paying a dividend again – I’d rather it continued to invest in its estate. But I still think this is a stock I’ll be buying in November.
Anglo American
I didn’t get around to buying shares in Anglo American (LSE:AAL) in October. That was probably a mistake that I should look to put right next month.
The stock has climbed about 4% over the last month and the market cap has reached £32bn as a result. Nonetheless, I still think there’s value at these levels.
Anglo American produces copper, iron ore, platinum, coal, and diamonds. But it’s planning on selling off some of its assets to focus on metals needed for the transition to renewable energy.
Selling off subsidiaries might incur significant costs and weak demand from China could weigh on copper prices. But while the risks are real, I think there’s a margin of safety in the stock.
Between them, the platinum, coal, and diamond operations made £818m in net income in 2023. Selling them at an average price-to-earnings (P/E) ratio of five should generate around £4bn.
That implies a market value of £28bn for the copper and iron divisions, which brought in around £3bn last year. In other words, that’s a P/E multiple of around nine, which I think is a bargain.
Value stocks
I’ve firmly got my value hat on when it comes to finding shares to buy in November. But that’s mostly because that’s where I think the best opportunities are right now.
Sometimes value comes from the market overestimating potential challenges and other times it’s the result of underappreciating a firm’s assets. Either way, it creates opportunities for me.
