The Stocks and Shares ISA deadline is fast approaching. With that in mind, I’ve been looking for investments to add to my ISA wrapper over the next few weeks.
There are two areas of the market where I’m concentrating my efforts on finding investment opportunities.
Stocks and Shares ISA opportunities
First of all, growth stocks such as Gamma Communications. The company is one of the few UK cloud computing businesses investors can buy shares in right now. Cloud computing is a vast and growing industry, and I think the sector will see continued growth for many years. Gamma is one of my top picks to play this trend.
That said, the company isn’t without its risks. It’s still relatively small compared to US technology giants and is never going to be able to compete with the likes of Microsoft. This could hold back growth in the long term.
Nonetheless, I’d buy Gamma as part of a diversified portfolio in my Stocks and Shares ISA. Another growth investment I’d buy is Computacenter. This tech stock targets a different section of the tech market to the cloud computing business. It provides the infrastructure required for customers to access online resources, things like computers and servers, as well as technical advice. I see this company as a way to invest in the picks and shovels of the cloud computing sector.
Once again, Computacenter is a relatively small business compared to some of its larger peers, which is the group’s biggest challenge. Other companies may be able to provide a better service at a lower cost. This sort of competition may hurt its long-term growth potential.
Recovery plays
The other area of the market where I’m looking for Stocks and Shares ISA investments is with recovery plays. Budget airline easyJet is a great example. The pandemic has severely impacted this business, but I believe its strong brand and virtually unrivalled European network will help it stage a rapid recovery when the European travel market begins to open up.
I think these sorts of investments come with more risks than the growth investments outlined above because there’s just so much that can go wrong. If the pandemic continues to disrupt travel markets in 2022, easyJet may have trouble finding more money to keep its operations afloat. That’s the most significant risk I think the company faces right now.
I’d also buy a financial services company such as Barclays in my Stocks and Shares ISA. Unlike easyJet, Barclays has continued to earn an income throughout the pandemic. It has booked losses on some loans to customers that it doesn’t expect to be repaid. But aside from these losses, the group has continued to generate cash. Its markets division has also provided some cushion against other losses.
That said, low-interest rates have hurt the group’s profit margins, and regulators have forced the bank to stop shareholder distributions. So, it hasn’t been plain sailing for the business. If interest rates remain depressed, Barclays’ profit margins will remain under pressure. If the coronavirus crisis continues, the organisation may also have to declare more loan losses.
Despite these risks, I think the stock could be an attractive recovery play for my stocks and shares ISA.