Over the last year or so, my portfolio has become much more concentrated in UK stocks. As share prices across the Atlantic have been climbing, I’ve been seeing bargains closer to home.
Some of them have worked out better than others. And there are three in particular that are now a lot cheaper than they were when I started buying them.
Bunzl
Bunz’s (LSE:BNZL) a FTSE 100 distribution company that I’ve admired it for some time. But I finally got around to buying it earlier this year… and almost immediately, it crashed 25%.
After a disappointing trading update, especially from the US, the company announced it was halting its ongoing share buyback programme. And there’s no set timeline for its resumption.
Given this, there’s no way to avoid the fact the macroeconomic situation in the US isn’t a risk and this makes buying difficult. But I think waiting might – quite literally – pay dividends.
Bunzl has an outstanding record of dividend growth and I don’t think there’s an imminent threat on this front. And the firm also has some important long-term strengths.
The FTSE 100 company has a huge scale advantage over its competitors and this is important for two reasons. The first is it means it can deliver products faster, cheaper, and more reliably.
It also creates opportunities for acquisitions. In general, a more fragmented market means Bunzl can buy other businesses and add them to its network without risking its balance sheet.
That big advantage is still intact and I think the challenges the company’s facing are temporary. So I’m going to stick with my investment and see what happens.
Macfarlane
In terms of size, Macfarlane‘s (LSE:MACF) at the other end of the scale. The packaging firm is up against some bigger competitors and there’s a risk this can put it at a disadvantage.
It’s tough to compete with larger companies when it comes to supplying cardboard boxes. But while the firm does do this, I think the other part of its business is much more interesting.
Macfarlane’s manufacturing division creates bespoke solutions for products that are unusually valuable or difficult to transport. And this is something I find very attractive.
Competing in this area is much more difficult. It isn’t just about being able to churn out boxes at scale – there’s complicated technical knowledge needed about different materials.
On top of this, I think demand should be relatively resilient. When the cost of replacing a product is high, it makes a lot more sense for customers to pay to reduce this risk.
Macfarlane’s share price has fallen around 10% since the start of the year. But I think there’s an opportunity for me to add to my investment at today’s prices.
Buying opportunities
Falling share prices can be great opportunities for investors. Unless something significant changes with the underlying business, buying at a discount can be a very good idea.
I think this is the case with both Bunzl and Macfarlane at the moment. But in the context of my own portfolio, it’s the packaging firm that I’m looking to prioritise for now.
