What shares should I purchase before the upcoming annual deadline for my Stocks and Shares ISA? I have been considering this question. Here are two British shares I have identified to buy now for my ISA.
Boohoo
One share I have already added to my ISA in 2022 is the digital retailer boohoo (LSE: BOO). After its price crashed 73% in the past 12 months, why would I consider the share?
Typically, I steer clear of turnaround situations, where a business has started to suffer badly and needs to fix itself. Looking at the price chart, two profit warnings last year, and reputational concerns related to boohoo’s supply chain, this could look like a turnaround situation. But I do not think it is.
Boohoo remains a growth machine. It expects to report double-digit percentage sales growth for last year. It has also been consistently profitable. Despite the pair of profit warnings I do not reckon boohoo’s business model has become structurally loss-making, even if it does fall into the red for a year or two.
The key issue I see at boohoo is rampant cost inflation hurting its finely tuned business model. With a focus on the low end of the market, the retailer has limited scope to raise its prices without the risk of losing customers. But its competitors are in the same boat. So I expect that over time, boohoo will be able to lift selling prices and return to its historical profit margins.
British shares to buy now
It might not deliver. But if my expectation turns out to be correct, I reckon the current boohoo share price will look like good value a couple of years from now.
That is why I have been stocking up on boohoo shares in my ISA. Maybe the shares will get even cheaper from here, as they have certainly been volatile lately. But I am not trying to time the market. I already see the current boohoo share price as offering me good value.
Unilever
Another name on my list of British shares to buy now for my ISA has also been grappling with inflation.
Consumer goods giant Unilever (LSE: ULVR) has factories all over the world. That helps give it global reach, with customers using its products over two billion times a day. But it also means that the company has seen big increases in everything from chemical ingredients for shampoos like Dove to packaging costs for food products such as Marmite.
Unilever reckons such inflation could add £3bn of extra costs this year. That definitely poses a risk to profits. But I also think this is the sort of situation in which owning a portfolio of premium brands can help a consumer goods business. Customers who see no direct substitute may pay more for their brands. Indeed, Unilever has pushed through its biggest price rises for a decade.
That may not be enough to support profit margins in the short term. But I reckon the long-term value of such a portfolio is strong. I see these as British shares to buy now and hold in my portfolio over the long term.