The deadline for using up the 2021-22 Stocks and Shares ISA allowance is today — 5 April. While I’m fully subscribed for the current financial year, I’m looking to invest more cash on Wednesday when the new financial year starts. With some more capital, I’m hoping to find bargains in the current market. So, here are some of the stocks I’m considering to maximise growth when I top up my ISA.
Royal Mail
Royal Mail (LSE:RMG) is currently trading at a 36% discount versus three months ago. Moreover, at 331p, the current price is massively down on last summer’s 600p.
But beyond the obvious upside potential, I believe Royal Mail will grow strongly in the future. The pandemic forced the London-headquartered firm to put parcels at the heart of its operations. Royal Mail has seen a massive increase in the number of parcels being posted through its service. This should help the group transform its revenue.
Moreover, just a few years ago, it was sorting the majority of parcels by hand. This was eating into the firm’s margins. But this year, that figure is expected to be half, representing a considerable change. I think there’s plenty of upside here and will be buying Royal Mail shortly.
Rising inflation, leading to higher wages, is one risk for this stock. Wages are one of the firm’s main costs, and wage inflation could be exacerbated by a strong union.
Crest Nicholson
Housebuilder Crest-Nicholson (LSE:CRST) returned to pre-tax profit in 2021 after a tough pandemic. While performance figures are still down on a few years ago, the company has made strategic changes to reposition the business.
In January, Crest said 2022 should be less volatile that previous years, noting that 63% of revenue for the financial year was already covered. They also suggested that the new leadership team had established a strong footing for future growth.
The stock is current trading around 276p a share. That’s massively down from just five years ago when the company’s share price exceeded £6. Like many housebuilders, the share price has continued to fall despite the positive performance data.
However, the impact of interest rate rises on demand for new homes, cladding repayments and inflation represent ongoing risks for the business. These have all weighed on its share price.
I own shares in Crest and will continue to hold.
Tate & Lyle
Tate & Lyle (LSE:TATE) isn’t exactly a beaten-up share, but there are promising signs for this food ingredients business. The group now focuses on products like sweeteners, thickeners and bulk commodities, having let go of its sugar brand.
It has sought to transform itself, selling off less profitable parts of the organisation. Instead, the company is focusing on higher-growth areas. The parts of the business sold off have been holding back the company’s margins. Without them, Tate & Lyle’s operating margins rise from 11.1% to 14.8%.
The stock is currently trading around 736p a share, down from highs of over 800p. It is also offering an attractive 4.17% dividend yield. Moreover, £500m of the £900m made by shedding less profitable units has been earmarked for shareholders.
One issue is that the firm’s dividend yield is not as well covered by earnings as I’d like. The dividend coverage ratio in 2021 was 1.77.