2022 has been a challenging year for many of those with Stocks and Shares ISAs. My own account has fallen by more than 20% from its highs as equity markets have declined.
This pullback hasn’t deterred me from buying more stocks and funds in my ISA however, as investing within an ISA remains one of the best ways to build wealth over the long term. With that in mind, here’s a look at three moves I made in my account last week.
I’m still buying Big Tech stocks in my ISA
The first move I made was to buy more Microsoft (NASDAQ: MSFT) shares. I snapped up stock at the $244 level. The reason I added to Microsoft is that I think it should hold up relatively well if we see a recession. Businesses are not going to suddenly stop using Office.
Meanwhile, I think the company has considerable long-term growth potential, thanks to its cloud computing business, Azure. It’s worth noting that Credit Suisse analysts believe the cloud growth opportunity is not reflected in current estimates.
Microsoft shares could keep falling in the short term, of course. Especially if the technology sector continues to underperform. However, I’m bullish on the long-term story here, and with the stock now trading with a forward-looking P/E ratio of 23, I think the valuation is attractive.
I want inflation protection
I also bought more shares in payments giant Visa (NYSE: V) last week. I picked up stock near the $194 level. I like Visa right now for several reasons. Firstly, the company has built-in inflation protection. It takes a cut from every transaction, so price rises actually benefit.
Secondly, if economic conditions continue to deteriorate, I’d expect more consumers to turn to credit cards. This should benefit Visa (it doesn’t have any credit risk – it simply operates the payments network).
Meanwhile, the long-term growth story here is compelling. In the decade ahead, trillions of transactions will shift from cash to card.
One risk I’m monitoring here is the threat of new payments technologies (e.g. Buy Now Pay Later). These could potentially impact growth.
I’m comfortable with this risk, however. And with the stock trading at around 23 times next financial year’s projected earnings, I think I picked up shares at a reasonable valuation.
I’m investing with ‘Britain’s Warren Buffett’
Finally, I also added to my holding in Fundsmith Equity. This is a global equity fund run by Terry Smith – who is often called ‘Britain’s Warren Buffett’ due to his excellent investment track record.
One reason I bought more Fundsmith units is that it invests in high-quality, resilient businesses. Examples of stocks in the fund include Diageo, Estée Lauder, and PepsiCo. These are the kinds of businesses I want to own in the current environment, where economic uncertainty is high.
The fund also tends to invest in businesses that have high gross margins and pricing power. These kinds of companies should, in theory, be protected from inflation, to a degree.
One issue here is that a lot of Fundsmith stocks do have higher valuations. This could be a problem in the short term if investors continue to offload expensive stocks.
I’m thinking long-term here, however. And I’m convinced this fund will boost my Stocks and Shares ISA in the long run.
