My top UK stock to buy in 2023 is up 21%!

Our writer revisits his top British stock to buy for 2023 and asks if he’d still invest in this FTSE 100 company after its 21% rise.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Bournemouth at night with a fireworks display from the pier

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

In December, I picked my top British stock to buy in 2023. This wasn’t a straightforward task, as I remember there were several really attractive UK investment opportunities at the time.

Anyway, in the end, I plumped for equipment rental firm Ashtead Group (LSE: AHT), and consequently bought the stock myself. And, so far, that’s proven to be quite a decent pick, as the share price has risen by 21% this year.

Here, I’m going to look at whether I’d still buy this FTSE 100 stock today.

Huge market opportunity

To recap, Ashtead is a plant-hire company trading under the Sunbelt Rentals name. It operates in the UK and North America, where it hires out a vast array of equipment, including diggers, cranes, scaffolding, tools, and on-site accommodation.

Though it’s the largest equipment rental company in the UK, around 85% of its revenue is derived from the US. Indeed, it’s the second-largest company of its kind across the pond, with 1,094 rental stores in 49 states.

And it is in the US where its massive market opportunity lies, as significant federal infrastructure spending is now underway. There is the Inflation Reduction Act and the CHIPS and Science Act, the latter of which is intended to re-shore semiconductor manufacturing and research from overseas.

This is expected to boost overall demand for rental equipment.

Economic cycle

Now, while these mega-projects should benefit Ashtead over time, construction is a deeply cyclical industry. And the US could still enter a recession next year, though a recent survey of economists now puts that risk at 50% or less.

Either way, recessions are relatively short-lived, usually lasting months. Periods of expansion, however, normally last for years.

This means Ashtead will spend considerably more time benefiting from US economic expansion than it will navigating economic downturns.

I’d also note that the company continues to broaden its end markets, including the rental of specialist film production equipment. This should make its revenue less cyclical in future.

Would I still buy the stock?

Despite the stock’s 21% gain in 2023, I would still buy it today.

In fact, that is exactly what I did in early July, as I added to my holding at a price of 5,300p.

I did this after the firm reported a record full-year performance in June. Group revenue grew by 24% year on year to $9.67bn, while adjusted pre-tax profit rose by 25% to $2.27bn. Its US business continued to drive most of this growth.

I should also note that JP Morgan recently increased its share price target to 6,700p from 6,500p. If that price is reached, which of course isn’t guaranteed, it would represent a 17% increase from today’s price of 5,756p.

Summing up, Ashtead appears poised to benefit from the massive industrial spending in the US. It is highly cash generative and has a strong pipeline of acquisition targets to drive future growth.

At 18 times earnings, it’s still relatively cheap for a high-quality growth stock. And management just kicked off a fresh $500m share buyback programme, adding to the £1bn it has already spent buying back shares since 2021. The company also has a progressive dividend policy.

All in all, I think Ashtead remains one of the best UK stocks to buy today.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Ben McPoland has positions in Ashtead Group Plc. The Motley Fool UK has no position in any of the shares mentioned. 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.

More on Investing Articles

Investing Articles

Surely, the Rolls-Royce share price can’t go any higher in 2025?

The Rolls-Royce share price was the best performer on the FTSE 100 in 2023 and so far in 2024. Dr…

Read more »

A young woman sitting on a couch looking at a book in a quiet library space.
Investing Articles

Here’s how an investor could start buying shares with £100 in January

Our writer explains some of the things he thinks investors on a limited budget should consider before they start buying…

Read more »

Investing Articles

Forget FTSE 100 airlines! I think shares in this company offer better value to consider

Stephen Wright thinks value investors looking for shares to buy should include aircraft leasing company Aercap. But is now the…

Read more »

Investing Articles

Are Rolls-Royce shares undervalued heading into 2025?

As the new year approaches, Rolls-Royce shares are the top holding of a US fund recommended by Warren Buffett. But…

Read more »

Investing Articles

£20k in a high-interest savings account? It could be earning more passive income in stocks

Millions of us want a passive income, but a high-interest savings account might not be the best way to do…

Read more »

Investing Articles

3 tried and tested ways to earn passive income in 2025

Our writer examines the latest market trends and economic forecasts to uncover three great ways to earn passive income in…

Read more »

Investing Articles

Here’s what £10k invested in the FTSE 100 at the start of 2024 would be worth today

Last week's dip gives the wrong impression of the FTSE 100, which has had a pretty solid year once dividends…

Read more »

Investing Articles

UK REITs: a once-in-a-decade passive income opportunity?

As dividend yields hit 10-year highs, Stephen Wright thinks real estate investment trusts could be a great place to consider…

Read more »