A fallen angel stock refers to a reputable company that has seen a fall in value over a period of time. These can sometimes make great long-term purchases to include in a Stocks and Shares ISA. Given the exemption from capital gains tax when selling stocks for a profit, if the shares do rally in coming years then there’s large profit potential. Here are two that I like right now.
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A controversial inclusion
A month ago, I wrote about the falling share price of ASOS (LSE:ASC). Despite the stock being at 52-week lows at that point in time, I said that I thought we were seeing panic selling and that the stock could fall further. I thought it was a good long-term buy, but would wait paitently to see how it traded over the coming months.
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It has fallen 46% over the past month. Over the past year, it’s now down 77%.
So why do I think it’s the right time to buy now? To begin with, I’m never going to perfectly pick the bottom. Waiting for a month has certainly provided a better price to buy, but I don’t want to be overly greedy and keep waiting for further potential losses.
It appears I’m not alone either. Just this week it was reported that Frasers Group has increased its shareholding in the business. Another news piece has commented that ASOS could see bid approaches.
Of course, the half-year results showing a loss before tax isn’t doing the company any favours. Yet I fundamentally believe that it’s well positioned and entrenched in the fast-fashion space, and I don’t see this changing.
A whale that should deliver steady growth
Another idea for an ISA is Diageo (LSE:DGE). Again, I wrote in more detail on the business recently as the share price has moved lower. Some of this is due to the previous CEO (Ivan Menezes) announcing his retirement. Sadly, he died earlier this week.
Despite being at 52-week lows, the stock is only down 8% in the past year. So we aren’t talking about a large fall in the same way as ASOS.
I think this makes a good addition to an ISA because of the incredibly strong brands held within the alcohol portfolio. This should ensure that revenue remains robust regardless of how the global economy performs this year.
If we get a sharp recovery, high-end whisky and tequila brands can deliver growth. Yet if we have a UK recession, lower-cost beer brands should be able to shoulder the revenue targets instead.
A business of the size of Diageo (with net sales of £15.4bn in 2022) is never going to be the hottest growth stock in the world. It’s a mature business. But I feel it can make back the losses from this year and offer steady share price gains for several years to come.
