I’ve been looking for shares to buy and hold with the ISA deadline fast approaching late on Tuesday, and the new financial year starting on Wednesday. While the market has recovered since Russia’s invasion of Ukraine, I think there are still plenty of undervalued stocks out there.
The two shares I wanted to discuss today are Bank of Georgia (LSE:BGEO) and Smith & Nephew (LSE:SN). Both of them are trading at a discount. But more importantly, I’m confident on the long-term prospects of these two firms.
Bank of Georgia
The Bank of Georgia share price had outperformed the market prior to Russia’s invasion. In fact, over the year to February, the Tbilisi-based bank had risen by nearly 40%. However, events in Ukraine sent the share price crumbling despite minimal impact on its operations.
For me, it appears that the market can’t see beyond Russia-induced volatility on this one. The Bank of Georgia looks very cheap with a price-to-earnings (P/E) ratio of just 3.3. However, even prior to the war in Ukraine, the bank’s P/E ratio remained below five, considerably less than most established western financial organisations.
Performance has been good with 2021 seeing the bank’s revenue exceed pre-pandemic levels. This was also reflected in pre-tax profits, which stood at £192m, more than any year in the last five.
The bank’s share price is also heavily influenced by Georgian economic data. Last week, its Office for National Statistics recorded that the economy had grown by 14.6% year-on-year. While average real GDP growth was equal to 16.3% over the year. Thus, the bank is operating in fast-growth market.
Moreover, it is worth noting that Georgia has attempted not to aggravate its northern neighbour, Russia. Tbilisi has said it wouldn’t impose sanctions on Russia, but claims it is in full compliance with the financial measures imposed by the international community. Russia and Georgia had not enjoyed good relations in recent history, especially since the 2008 Russo-Georgian war.
I have recently bought shares in the bank.
Smith & Nephew
I believe Smith & Nephew has considerable upside potential because of the pent-up demand for elective surgeries owing to pandemic-induced delays. As I write, the medical devices giant is trading at around 1,229p per share, considerably discounted from a year-high of 1,592p in July 2021.
In fact, prior to the Covid-19 pandemic, the London-headquartered firm almost saw its share price push beyond 2,000p for the first time.
Despite a tough operating environment over the past two years, Smith and Nephew still returned a profit in 2020 and 2021. And although 2021 saw further Covid-induced disruption, particularly at the beginning of the year, the firm posted a $586m pre-tax profit. The figure represents good progress but some distance behind the $743m recorded in 2019.
I think Smith & Nephew is well-positioned to benefit from the current situation. In England alone, there are now more than six million people waiting for elective procedures. Moreover, there is considerable political will to reduce the waiting list.
I’m confident it will profit from the pent-up demand in 2022 and further into the future. Having said that, I accept there are risks, including the emergence of new Covid variants.
I own shares in Smith & Nephew in my pension and will be looking to purchase more for my ISA.