2023 has very much been a stock picker’s market. As a whole, the UK stock market hasn’t done much. However, some UK shares (Rolls-Royce, Marks & Spencer, Sage) have soared.
Looking ahead to next year, I think we could see similar market conditions, so I believe stock selection will be important. With that in mind, here’s a look at two shares I’ve recently been buying for 2024.
Benefiting from US mega projects
First up is Ashtead (LSE: AHT), a leading construction equipment rental company that operates in the US, Canada, and the UK.
Why am I bullish on this stock? Well today, Ashtead generates the bulk of its revenues in the US. And 2024 looks set to be a huge year for construction projects over there.
Recently, the US government has passed a number of bills designed to strengthen the country’s infrastructure and promote the ‘onshoring’ of manufacturing jobs. And a lot of the funding for related projects is set to kick in next year.
It’s worth noting that Ashtead already has a lot of momentum in the US. For the quarter ended 31 July, for example, US revenues were up 22% year on year.
“Our business has clear momentum with robust end markets in North America, which are supported in the US by the increasing number of mega projects and recent legislative acts,” commented CEO Brendan Horgan in the group’s most recent trading update.
Of course, a slowdown in the US economy is a risk.
However, at their current valuation (the forward-looking price-to-earnings (P/E) ratio here is about 13), I think the shares look attractive.
It’s worth noting that analysts at HSBC recently raised their price target to 6,860p – about 44% above the current share price.
Microsoft partnership
Another UK stock I’ve been buying lately, ahead of 2024, is London Stock Exchange Group (LSE: LSEG), the leading financial markets infrastructure and data company.
There’s a lot to like about this company from an investment perspective, to my mind.
For starters, it’s now a major player in the financial data space, thanks to its acquisition of Refinitiv (recently renamed LSEG Workspace). This is an industry-leading product that thousands of investment firms rely on.
Secondly, it’s the owner of the FTSE and Russell indexes. Owning major indexes like these (FTSE 100, Russell 2000, etc) is basically a licence to print money.
Why am I bullish for 2024? LSEG recently partnered with tech powerhouse Microsoft to develop advanced data solutions. And it says that customers will begin to see the benefits of the partnership next year.
Additionally, selling activity from major shareholders Thomson Reuters and Blackstone (who received a lot of stock after the Refinitiv deal) could come to an end next year, giving the share price a new lease of life.
A risk here is that the stock could be dragged down if tech stocks sell off.
But with a forward-looking P/E ratio sitting at just 22, I like the risk/reward skew.
JP Morgan recently raised their target price to 9,920p – about 23% above the current share price.
