UK growth stocks have taken a real beating lately, as Donald Trump’s trade tariff threats sending investors into panic mode.
Whilst stock market volatility can be distressing, it’s also a huge opportunity to pick up my favourite shares at reduced valuations.
I’ve responded by buying two FTSE 100 companies that have been caught up in the storm.
History shows that stock markets do not fall forever. That will be the case here, too. Trump has already relented, and at some point, sentiment may recover. Although I’m expecting plenty of trauma before that.
JD Sports shares are so cheap
I’ve averaged down on trainer specialist JD Sports Fashion (LSE: JD.) three times. Every time the share price has dropped, I’ve topped up at a lower level, reducing my average entry price. It’s a little bruising seeing it fall, but also means I stand to gain more when it finally rebounds – assuming it does!
JD Sports surged on 9 April as it reported that full-year 2024 profits were in line with previous guidance and announced the launch of a £100m share buyback.
Revenue had ticked up and margins held firm, which suggested there’s still solid demand for its brand mix. Expectations for 2025 and beyond were solid, but remain subject to tariff wars. As it sells European brands like Adidas in the US, it’s vulnerable.
It’s had a tough two years as the key Christmas trading period has disappointed for two years in a row, with shoppers feeling the pinch, while its US expansion via its £1.1bn Hibbett acquisition came at a bad time.
The JD Sports share price is still down 37% over one year and 54% over two. It now looks astonishingly cheap with a price-to-earnings (P/E) ratio of just over six. I think it has real growth potential.
Of course, retail is vulnerable to slowdowns, and JD’s reliance on the US could be a sticking point if trade wars worsen. But I’m backing the brand for the long term.
Have you seen IAG’s P/E?
I’ve been waiting to buy International Consolidated Airlines Group (LSE: IAG) for months. The British Airways owner’s shares doubled last year as international travel recovered and investors took advantage of its cheap share price.
IAG was expected to benefit from the pick-up in transatlantic travel, but Trump has trashed that story, at least for now.
Which is fine by me. The dip in the IAG share price gave me the opportunity I was looking for. Its down 22% in three months, all thanks to last year’s blistering run it’s up 54% over 12 months.
The stock still looks very cheap. Even cheaper than JD Sports, with a P/E at just over five times earnings. That’s despite a return to profitability.
The airline sector is vulnerable to shocks. Fuel prices, geopolitics, war, recessions, natural disasters and now Donald Trump can disrupt revenues and profits.
I’m not expecting a smooth ride, but I do expect to come out ahead when sentiment turns. As with JD Sports, I’m planning to hold IAG shares for a minimum of 10 years, and ideally a lot longer than that.
With these two picks, I’m not trying to time the market. I’m preparing for the next bull run, whenever it comes.
