As it sounds, the Self-Invested Personal Pension (SIPP) is a way for you and me to secure a more comfortable retirement off our own bats. The government sweetens the case by offering tax relief on the contributions made, although we can’t withdraw any of our capital before the age of 55.
You can find out more about this kind of account here. For now, however, I want to tell you about two stocks that, while currently unloved by the market, could turn out to be excellent, long-term recovery stories — something that SIPPs are perfectly geared to.
Time will tell
Zigging while other investors are zagging rarely feels comfortable, but that’s partly why I’ve become increasingly positive on battered retailer Superdry (LSE: SDRY) over the last couple of weeks.
In my opinion, the recent boardroom coup by founder Julian Dunkerton should mark the beginning of a new, optimistic chapter in the retailer’s story. He undoubtedly faces a tricky few years ahead but I suspect he’s likely to make a better job of resurrecting Superdry than the old board.
For one, Superdry’s shares now trade almost 80% below the high hit back in January 2018, and yet the returning director still owns a good chunk of the company.
If we go by the maxim that those with sufficient ‘skin in the game’ will always be more incentivised to hit targets, then I’d say this bodes well. Note that Dunkerton has also promised not to sell any shares for the next two years.
Some ‘kitchen-sinking’ is somewhat inevitable over the coming months, not to mention share sells by those institutional investors that opposed his return.
Nevertheless, I think the stock looks good value, trading as it does on a P/E of just 8 for the next financial year (although analyst estimates could be revised later in 2019).
Superdry lost its way but, with reduced discounting, a return to its “design-led roots” and a highly motivated leader back at the helm, money could be made by taking a stake at some point over the next six months or so.
The worst might be over
On the face of it, buying stock in CMC Markets (LSE: CMCX) looks a risky bet. New regulations and reduced client activity have led to a huge reduction in revenue in recent times, and CMC’s share price has dived 55% over the last 12 months as a result. Peer IG Index (where I now hold a long position) has also suffered.
That said, I suspect we could be getting close to the point of maximum pessimism. In its most recent trading update, the company said CFD and spread-bet revenue would come in around £110m for the 2018/19 financial year — 37% lower than in 2017/18.
While clearly not great news, CMC did go on to say that the impact of new rules was “showing signs of stabilising.” Active and new client numbers are steady and the company is sticking with its outlook for the next financial year, supported by the growth of its stockbroking business in Australia.
Calling the absolute bottom is hard, if not impossible to do on a consistent basis and we at the Fool UK recommend private investors shouldn’t try.
As such, I think a forward P/E of 10 already looks pretty cheap and brave investors could be rewarded when market volatility inevitably returns.
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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Superdry. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.