Business is never plain sailing. Over the decades, certain sectors go in and out of favour. Companies can experience a share price fall, before a new CEO or a strategy shift helps the business pivot and come back stronger. These can be good value stocks for me to include in my Stocks and Shares ISA, as the long-term gains can be high. Here are two ideas that I’ve got my eye on now.
Getting off the ground
Wizz Air (LSE:WIZZ) shares are down 43% over the past year. In fact, the stock is at the lowest level since 2015. It’s true that this fact alone doesn’t make it a value purchase, but it does suggest that there’s an oppourtunity.
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The firm has been struggling recently due to engine-related groundings for some of the fleet. Naturally, without getting planes in the air, capacity shrinks, as does revenue. Based on the latest August update, there doesn’t seem to be a clear resolution date for this problem, which I think is weighing on investor minds.
I accept this as a problem (and a risk going forward) but I don’t believe this warrants such a strong move lower. Taking a step back, Wizz Air is actually doing very well. The 2023 results showed that revenue hit the highest level since before the pandemic. Further, it posted a net profit for the first time since 2020, showing that things are firmly back on track.
Given the nature of the short-haul flights, I think future demand should be strong. Cuts to interest rates should help to ease the pinch for consumers, which could translate to more bookings for leisure trips around Europe.
A blip on the radar
Earlier this week (22 August), I wrote about JD Sports Fashion (LSE:JD) in detail. I flagged up how the quarterly results that were released were much better than I expected. The 11% jump on the day showed me that I wasn’t alone in this surprise!
However, I’d still say that the stock is a value play right now. It’s down 7% over the past year, largely due to the fall from Q1 when it issued a profit warning. This was followed by disappointing results in May, where quarterly like-for-like UK sales dropped by 6.4%.
The management team is focused on a swift turnaround to get the business back on the growth trajectory it has been on in recent years. It’s investing to diversify revenue streams away from the UK, shown by the confirmed acquisition last month of US-based Hibbett. Further, the business is focusing on “promotional discipline and managed inventory proactively”.
A risk is that the expansion into North America goes badly, with the management of Hibbett stores being a costly headache.
With the track record of JD Sports Fashion, I think the year so far is just a blip. I believe both stocks could be a great purchase for my ISA and I’m thinking about buying both. As a reminder, I don’t have to pay capital gains tax on the proceeds of selling shares in my ISA. This makes it an attractive home for these long-term plays.
