The best returns often come from investing when others are worried about falling prices. And I think UK investors looking for stocks to buy have some opportunities that could be rewarding.
Over the long term, what matters most with a stock investment is the quality of the underlying business. And there are a couple of names that seem to be worth a closer look at the moment.
InterContinental Hotels Group
Shares in FTSE 100 hotel chain InterContinental Hotels Group (LSE:IHG) have fallen 22% since the start of the year. And there have definitely been some challenges for the company.
Results for 2024 were largely in line with expectations. But higher costs and the potential for US tariffs mean the short-term outlook isn’t as strong, which is why the stock is down.
There’s also a constant risk of a recession. If consumers find budgets under pressure and travel demand falls off, this is likely to be reflected in InterContinental’s revenues.
While investors shouldn’t ignore these risks, the firm does have some very attractive attributes. One is its strong pipeline of opportunities for expanding its network over the next few years.
Another is the fact is the company doesn’t have to invest much to grow. Billionaire investor Warren Buffett says this is the mark of the best businesses and InterContinental Hotels Group’s a great example.
At a price-to-earnings (P/E) ratio of 24, the stock doesn’t look obviously cheap. But I think its strong growth prospects and low capital requirements mean investors should take a look.
Judges Scientific
Judges Scientific (LSE:JDG) has a very impressive long-term record. Over the last 10 years, sales have grown at almost 13% a year and earnings per share have increased by 16% a year.
As a result, the stock’s up 300% over the last decade. But 2024 hasn’t been a good year for the company at all – the stock fell 44% after revenues declined 2% and earnings per share fell 24%.
Investors however, might think this is an overreaction. The weak financial performance has been the result of customers delaying and deferring orders, which has weighed on sales.
Several of these contracts though, are set to boost revenues in the first half of this year. So the decline in revenues looks likely to be short-lived and I also expect profits to recover strongly.
On top of this, I also think the current environment’s good for companies looking to make acquisitions. And this has been – and still is – a big part of Judges Scientific’s growth strategy.
Uneven demand requires a company to manage its cash flows carefully and this can be a long-term risk. But the falling share price looks like an opportunity for investors to consider.
Buying the dip
It can be tough to buy shares when prices are falling. Even when a stock’s down 22% in four months, or 44% in a year, there’s no rule saying it can’t fall further.
Short-term overreactions however, tend to reverse over time. And this is worth remembering when considering stocks like InterContinental Hotels Group and Judges Scientific.
