Being greedy when others are fearful while hunting for stocks to buy is one of the many ways Warren Buffett has built his fortune. The stock market has stabilised and started to recover from the recent downward correction that kicked off in late 2021. However, there are still plenty of undervalued shares flooding UK and US exchanges. And with global economic forecasts becoming increasingly bullish, now might be the perfect time to capitalise on these opportunities.
With that in mind, here are three stocks from my portfolio that I’m targeting for a top-up.
Rebounding e-commerce
One of the many sectors hit hard by surging inflation and interest rates is online retail. With a few exceptions, the drastic fall in consumer discretionary spending led to a sharp downturn in online orders. This slowdown was only emphasised further thanks to the previously explosive performance of the sector during the pandemic lockdowns.
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Consequently, shares like Shopify (NYSE:SHOP) and dotDigital (LSE:DOTD) were obliterated. But since then, economic conditions have improved. And the latest results from both companies revealed encouraging trends.
Shopify — the e-commerce platform giant — enjoyed a 24% jump in sales to $2.1bn on the back of more subscriptions and higher merchandising volumes moving through its system. Meanwhile, dotDigital – the digital marketing platform – also saw double-digit growth across its top and bottom lines.
What’s more, with the dotDigital’s technology able to plug directly into Shopify’s ecosystem, the UK business is piggybacking on the US firm’s success in addition to industry tailwinds.
Of course, neither enterprise is without its risks. Both continue to face rampant competition from peers with far deeper pockets. And even after their share prices have tanked, the market capitalisations are a bit lofty inviting higher volatility to a portfolio. Yet in my opinion, the current valuations still don’t appreciate these companies’ long-term potential.
Profiting from volatile real estate
Despite having a reputation for being a ‘safe’ investment, shareholders of real estate companies were once again reminded of the cyclicality of this sector. With higher interest rates sending the cost of mortgages through the roof, property values across the country have largely tumbled, especially in areas like London.
As such, my portfolio positions in real estate companies haven’t exactly been stellar performers these last couple of years. But while the share prices have suffered, tenants continued to pay rent. Therefore, with undisrupted cash flows, dividends have kept flowing – something that doesn’t seem likely to change any time soon.
With inflation moving closer to the Bank of England’s 2% target, interest rate cuts could emerge later this year. This would likely be the spark that triggers the UK property market’s recovery, sending valuations back in the right direction and making a company like Safestore (LSE:SAFE) an attractive proposition.
The self-storage enterprise has seen some of its customer stickiness wear off as occupancy falls to 77%. However, this seems to be an industry-wide trend triggered by current economic conditions rather than a problem with Safestore specifically. In other words, this lull in performance appears temporary.
Meanwhile, remaining tenants are happy to pay a higher rate, resulting in stable cash flow, which continues to support a chunky dividend that’s been hiked 14 years in a row. That’s why I think it could be one of the best income stocks to buy now.
