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With all the stock market volatility in 2022, there are countless buying opportunities for keen investors with £3k and a stocks and shares ISA. Here are three promising investments that seem to be firing on all cylinders despite the economic turmoil.
1. Business banking reforms
Alpha FX Group (LSE:AFX) is a rapidly expanding fintech enterprise. It helps businesses hedge against foreign currency fluctuations while simultaneously providing an alternative banking suite. While the latter service remains relatively new and a small part of the overall revenue stream, it has proven to be extremely popular with customers.
According to the group’s October trading update, a rising interest rate environment coupled with an increase in forex volatility has created some large-scale windows. So much so that management now expects profits to come in higher than expected even after raising guidance earlier this year.
But, surprisingly, this strong performance is coupled with a fairly high valuation. With a P/E ratio of around 35, the stock can hardly be described as cheap, presenting additional investment risk in a stocks and shares ISA. However, sustained double-digit growth in revenue and earnings may be worth the premium.
2. Playing gaming theme with UK shares
Keywords Studio (LSE:KWS) is a provider of technical and creative services to the video game development industry. Working alongside leading studios from around the world, Keywords provides the bulk of talent needed to design, build and test new games.
2022 has been a very eventful year for the business, with revenue and earnings growing by 32% and 28% respectively. While consumer spending can be affected by inflation, demand for video games seems largely immune and is still growing. In fact, management now expects the strong momentum of 2022 to continue well into 2023, pushing results toward the high end of current expectations.
At the heart of this impressive growth lies the acquisition strategy of keywords. The company continues to pursue bolt-on purchases of smaller service studios to strengthen and expand its long list of services. But acquisitions don’t always go smoothly. And a series of underperforming deals could saddle the balance sheet with expensive debt — even more so now that interest rates are rising.
So far, management has demonstrated its ability to find value-adding deals. And if that doesn’t change in the future, this stock could be an attractive addition to a stocks and shares ISA in 2023 and beyond.
3. Renewal of ISA
The rising cost of living has put many home renovation projects on hold. Or at least that’s the commonly held opinion. Still watching Howden Joinery (LSE:HWDN), it seems someone forgot to tell them.
The group is a designer and supplier of fitted kitchens working directly with traders. With a vertically integrated business model, its supply chains have proven to be quite resilient to disruptions over the past few years. And despite the economic downturn, sales in the UK and internationally have grown by double digits. In fact, management now expects its 2022 pre-tax earnings to beat analyst consensus.
Continued economic uncertainty undoubtedly raises the risk profile, particularly if the UK falls into a deep recession. But given its resilience so far, and the fact that kitchen demand is unlikely to disappear in the long term, Howden Joinery looks like an excellent stock to buy for patient investors.
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