At the end of last week, I sold part of an investment in my Stocks and Shares ISA. I’m not allowed to say what it is yet for disclosure reasons, but I’m looking to redeploy the proceeds.
The big question is which stock (or stocks) should I buy? I’m in a position to make something a meaningful part of my portfolio, but I’m finding it hard to decide between a few options.
Admiral
From the FTSE 100, I like Admiral (LSE:ADM) very much. It operates in an industry that isn’t discretionary – people need car insurance – and consistently outperforms its competitors.
On top of this, its policy of reinsuring most of its risk means the company is able to return a lot of cash to shareholders via dividends. This is another attractive feature of the business.
One thing to keep an eye on with Admiral is inflation. Used cars and repairs becoming more expensive is the kind of thing that can cut into margins, despite its strong competitive position.
The stock got to my price target – which is £25 – earlier this year, but I wasn’t in a position to buy then. So I’m now wondering whether I need to be patient with this one.
Macfarlane
Another stock I’ve got my eye on is Macfarlane (LSE:MACF). With a market-cap of £172m, this is a much smaller business, but it’s one that I think has a lot of attractive features.
The company specialises in packaging products. Obviously, this is an industry with a lot of bigger competitors and this is something of a risk, especially for basic things like boxes.
Importantly though, not all packaging is like this. With healthcare products, there are certain technical requirements to meet and particular standards, creating a barrier to entry.
The stock is actually trading well below my estimate of its intrinsic value at the moment. So it’s definitely one that I’m considering for my ISA.
Polaris
Over in the US, I’ve got an eye on Polaris (NYSE:PII) shares. The company is one of the world’s top manufacturers of recreational vehicles (RVs), such as snowmobiles, boats, and motorcycles.
The stock is down quite a bit recently, which is largely due to US interest rates. With a lot of the firm’s sales financed through borrowing, the possibility of rates remaining high is a risk.
This, however, is a risk across the industry. And I think it’s one that Polaris – by virtue of the strength of its brands and its distribution network is better placed to deal with than its rivals.
As a result, I expect the company to cope with a difficult trading environment better than most. And with the stock at an unusually low price, this could be my opportunity.
Opportunities
Warren Buffett and the team at Berkshire Hathaway might be backing away from shares at the moment. But I’m not looking to build a cash position of my own.
I’m in the unusual position of having cash available and seeing a range of opportunities, both in the UK and the US. I’m still figuring out what to do, but I’m expecting to act soon.
