If the New Year already feels a long time ago to you, you are not alone. It has been a frenetic few weeks in stock markets as investors try to suss out whether the tech boom can continue or is in the process of deflating. Looking ahead to February, what shares should I consider buying for my portfolio? Here are two I am thinking about.
Cheers to a potential pub recovery
I have been bullish on pub chain J D Wetherspoon (LSE: JDW) for a while. So far that bullishness has not been shared by the wider market. The Wetherspoon share price has fallen 22% in the past year. It is now 46% lower than in December 2019, before the pandemic hit the headlines — and the company’s business.
So why would I consider adding Wetherspoon shares to my portfolio now?
I think the past couple of years have fundamentally changed some elements of the pub trade. Cost inflation has driven input prices up. I expect them to stay at elevated levels. Staffing problems are acute. Many people have decided that drinking supermarket beer on their sofa is cheaper and perhaps safer than going to a pub. I think the pub trade may never wholly recover from the pandemic even when life is fully back to normal.
But I reckon Wetherspoons, as a well-run, experienced, and competitively priced publican, is likely to do better than some of its competitors in the years to come. Indeed, problems elsewhere in the trade could create new opportunities for the industry titan. As pub restrictions are eased, I think the coming months could see a boom in demand. Wetherspoons still faces a lot of risks. Cost price inflation could hurt profit margins, while supply chain problems could hurt sales if product is unavailable. But at the current Wetherspoons share price, I would consider tucking the company into my portfolio now as a recovery play.
UK growth share on sale
The second company I would consider buying for my portfolio as I look ahead to February and beyond is online fashion retailer boohoo (LSE: BOO). While customers love its clothes changing hands for very cheap prices, shareholders do not feel the same way about its shares.
I see an opportunity for my portfolio in the company’s recent difficulties. Some of what has driven the share price to plunge 70% in the past year is concerns about labour standards at the company’s suppliers. I think that is relatively easy to fix and the company seems to be tackling the issue. Other problems such as cost inflation could be harder to manage, especially as the company operates in the low cost market where price increases can hurt sales. In the long term, though, I expect the company to realign its business model to cope with more expensive material costs. That could lead to improving profitability.
Shares to buy for my portfolio
Both of these beaten down shares attract me. That is not just because their prices have fallen. I like them because I think they both have strong business models that have a sustainable competitive advantage.
I may take advantage of their current share price weakness to add them to my portfolio for February and beyond.