Many investors seem to have lost their appetite for shares. The mood in the markets is quite different from the buzz that followed the pandemic crash in 2020. But maybe it’s a good time to hunt for stocks to buy right now.
Positive news flow
To my reading of the situation, the economic news has been improving for some time.
For example, on Tuesday 23 May, the news wires covered the story that the International Monetary Fund (IMF) has revised upwards its growth forecast for the UK economy.
That’s the second upgrade from the organisation over the past couple of months. And it now thinks the UK economy will grow by about 0.4% this year. But last month the boffins at the IMF thought it would contract by 0.3%.
Maybe they’ll have another guess next month. But in the meantime, the positive prediction builds on a what has become a stream of upbeat news this year – at least to my reading.
I’m thinking of things like the gathering expectancy that the central banks are beginning to win the battle against price inflation. And the fact that the supply-chain issues we saw last year have been evaporating fast.
I’m also encouraged by the way shipping rates have fallen this year and commodity prices have eased back. Almost all those things will likely feed into lower costs for many businesses.
Meanwhile, many companies have taken advantage of the inflationary environment to raise their selling prices. And a well-known investor who goes by the handle of Cockney Rebel recently pointed out that higher selling prices and falling costs may lead to bigger earnings.
A compelling theory
And I reckon that’s a compelling theory. Meanwhile, the headline-grabbing assertions of the IMF and others have done much to keep investor sentiment depressed. Indeed, there’s been a lot of ‘fear’ and uncertainty in the air.
But that’s arguably a perfect set of circumstances for finding decent long-term stock opportunities. There’s the prospect of rapidly improving business conditions ahead and lingering investor reticence helping to keep company valuations down.
It seems to me such circumstances are the kind of thing that can kick off enduring, broad-based bull markets, although nothing is ever certain or guaranteed with stocks. And even now it’s possible to lose money with a diversified portfolio of shares.
Nevertheless, several UK stocks are on my immediate radar for further and deeper research with a view to buying for the long term.
For example, try as I might, I just can’t ignore the gargantuan dividend yields on offer from smoking products companies Imperial Brands and British American Tobacco.
And focusing on hopefully sustainable and defensive yields, I’m also keen on pharmaceutical company GSK, energy business National Grid, and trading platform provider IGG.
But on the theme of businesses that could see improving profits ahead, I’d also consider retailers Next and Dunelm.
All businesses can face challenges from time to time, and positive outcomes are not certain even when holding stocks like these for the long term.
However, I’m optimistic about the potential of these enterprises. So I’m digging in with my research now before a bull market arrives and it’s too late to bag stock bargains.
