In recent weeks, we have noticed a massive change in the stock market. Investors have dropped technology stocks and deposited money in cyclical stocks such as banks, airlines and energy companies. Looks like the ‘great reopening trade’ is back.
I don’t plan to invest a lot of money in cyclical stocks. Because history shows that, often, they invest quite poorly in the long run. Having said that, I want to buy some circular stocks for my portfolio today. There are two UK stocks here that I would love to see right now.
A top UK stock that I want to buy now
A circular stock that looks interesting to me right now Wise (LSE: PRU). Financial services companies specialize in insurance and savings solutions. After the recent cessation of U.S. operations, it has now shifted its focus purely to Asia and Africa.
There are two main reasons I am bullish on Prudential. The first is that the company may benefit from higher interest rates in the future. Life insurers usually benefit from the difference between the money paid in the policy and the money earned on the investment (stocks and bonds, etc.). When interest rates are high, insurers can earn more from their fixed income investments. This can increase profits.
The second reason I am overwhelmed here is that focusing on Asia and Africa means there is significant potential for long-term growth. In this region of the world, incomes are growing rapidly and this is creating strong demand for financial solutions. This can be seen in the results of the first half of the group. Months From June0 to June0, annual premium equivalent (APE) sales in Asia and Africa rose 17% to 2,083 million.
There are risks to consider here, of course. One is the Chinese economy. If China Evergrand As the crisis leads to economic recession, Prudential may be affected.
Overall, however, I think the long-term risk / reward offer is interesting here. The stock’s far-sighted P / E ratio of 15.5 seems very reasonable to me.
Another cyclical stock that I will buy today DS Smith (LSE: SMDS). It is a leading packaging company that specializes in sustainable solutions for the e-commerce and fast-moving consumer goods industry.
There are several reasons why I like the look of DS Smith’s shares at the moment. The first is that the company will benefit from the economic recovery. Generally speaking, high levels of economic activity lead to high demand for packaging.
The second is the company’s focus on e-commerce packaging. The e-commerce industry is expected to grow significantly in the coming years. So these tailwinds should be provided.
DS Smith recently posted an encouraging trading statement. The group said that since May, trading has continued to make good progress and the volume of boxes has increased. “Very strongly“Vs. comparative previous year period and 2019 comparative period.
Looking ahead, management was confident about the future. “Although the macroeconomic environment remains uncertain, we remain confident of business prospects this fiscal year and beyond., ”Said CEO Miles Roberts.
A big risk here is inflation. In the near future, increasing input and transportation costs could affect profitability. Overall, however, I’m pretty excited about DS Smith. I see the stock’s forwarding P / E ratio of 14.1 as interesting.
It deserves the attention of analysts JP Morgan Recently raised their price target to 577p – about 36% of the current share price.
JPMorgan is an advertising partner of Chase The Ascent, a motley flower company. Edward Sheldon owns shares in DS Smith and Prudential. Motley Full UK is recommended by DS Smith and Prudential. The opinions expressed in the companies mentioned in this article may differ from those of the authors and therefore the official recommendations we make on our subscription services such as Share Advisors, Hidden Winners and Pro. Here at The Motley Flower we believe that considering a variety of insights makes us a better investor.