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According to those who “sell in May and leave”, the time has come to buy shares again. I don't follow this strategy, but I'm still adding to my portfolio right now.
He FTSE 100 and the FTSE 250 They have been relatively stable lately. But a couple of quality stocks have fallen significantly and I think this presents an opportunity for an investor like me.
Rentokil
Actions in Rentokil Initial (LSE:RTO) fell sharply in September when the company published its latest trading update. In doing so, he highlighted one of the stock's key risks.
In 2022, the company spent just over £4.5bn to acquire Terminix, a major US competitor. But so far the expected growth in demand has not materialized, making the process more expensive.
Despite this, I think the stock looks attractive after a 20% drop. One explanation for this is that I expect the pest control market to grow for several reasons.
For starters, climate change – warmer summers and wetter winters that provide better breeding conditions for pests – is a big part of this.
I also hope that Rentokil's presence in the US will prove valuable over time. It's hard to say exactly how soon, but I think the company will be difficult to compete with in the long term.
As an investor, that's exactly the type of business I want to have. And while the market is concerned about short-term gains, I look at the bigger picture.
AG up
Honestly, I thought I had missed the opportunity to buy shares of AG up (LSE: EXCHANGE). But a 9% drop following the company's interim results has changed my mind.
Revenue rose 5%, but profits fell due to costs associated with closing its distribution operation. However, I don't expect this to repeat itself, so I think the problem is temporary.
In its most recent annual report, management outlined a path to reduce costs in the coming years. The forecast was for operating margins to reach 14.5% by the end of 2026.
The company has since changed CEO, making relying on past forecasts risky. But if the anticipated efficiencies materialize, profits could increase significantly.
Achieving these goals would increase Barr's operating profits by 31%, even if sales do not increase further. If that happens, I think the stock will rise.
With the stock falling, I don't think it's expensive at current prices. That's why I've been buying it for my portfolio and plan to continue doing so.
Opportunities in the UK
As for my portfolio, I look for stocks of quality companies that are trading at attractive prices. And I think there are opportunities right now, even with stocks being pretty stable overall.
In my opinion, both Rentokil Initial and AG Barr fall into that category. That's why I've been purchasing both recently and intend to continue doing so.