The UK’s FTSE All-Share index had a good run between October 2023 and May 2024, rising around 16%. But then it stalled and has moved essentially sideways since. How frustrating!
However, periods of treading water can be good for stocks and shares. Sometimes the market can run away with itself and company valuations often become stretched.
Business progress often continues
So it’s good to see the FTSE All-Share pause every so often. It gives businesses time to catch up a bit with their valuations. I reckon that often happens because operational progress in the underlying enterprises continues despite the stock market taking a breather.
However, despite the possibility of opportunity, it’s sometimes hard to see it. General news about politics and the economy can seem negative and discouraging when the market’s flat-lining. That’s perhaps one of the reasons investor sentiment has cooled in the first place.
But I reckon it’s a good time now for me to consider putting regular investments into index funds, such as the FTSE All-Share. Monthly payments into such tracker funds may help me to capture and benefit from the long-term progress of the market.
However, higher returns can often be found by targeting the shares of individual companies. For example, when the FTSE All-Share delivered its 16% gain recently, Rolls-Royce Holdings went up by around 108%. Another out-performer was 3i Group, which rose by about 50%.
Those two examples are among many stocks that did well. All I need to do is find the next batch of out-performers and disregard those that under-performed! Of course that’s not an easy task, but research and analysis can help.
One I’m watching now
For example, my watchlist has names such as Bloomsbury Publishing (LSE: BMY). The company’s known for being the publisher of the Harry Potter series. But it also produces books and other media for general readers, students, researchers, and professionals.
The stock’s been performing well for some time, driven by a strong flow of increasing annual earnings since 2018.
Looking ahead, City analysts think normalised earnings will ease a bit during the current trading year to February 2025 before bouncing back the year after.
In October, the company posted an impressive set of half-year figures. Chief executive Nigel Newton pointed to the company’s recent acquisition of Rowan & Littlefield, saying it “significantly strengthens” the firm’s academic portfolio.
Newton also said revenue from the consumer division grew by 47% in the period. That outcome was driven by the ongoing success of the firm’s fantasy fiction offering “and a wide range of bestsellers from cookery to novels”.
Harry Potter was a rip-roaring success, but there’s always the chance of a series of future failures, even though the firm’s output is more diversified these days. On top of that, shareholders face some valuation risk. With the stock near 688p, the anticipated price-to-earnings (P/E) ratio for next year is a full-looking 17.
Nevertheless, I see the business as a quality operation with ongoing growth prospects. So I’m keen to undertake further research with a view to considering the shares for a long-term hold.
