It has been a lively time on the UK stock market, with some prices falling heavily in recent months. On its own that does not mean that they are cheap. But when I see quality companies trading at what I think is an attractive price, I consider buying them for my portfolio. That was the rationale behind a hat-trick of FTSE 100 share purchases I made in October after their prices had fallen.
Howden Joinery
I had been thinking about buying into timber merchant Howden Joinery (LSE: HWDN) for a while.
The investment case is strong in my opinion. By developing relationships with trade customers, the company is able to attract repeat custom often with substantial sales volumes. The nature of the business and transportation costs means that Howden’s national network of local depots can help give it a cost advantage over farther flung suppliers. It has proven its business model can be very profitable.
Worries about a declining housing market have hit its shares hard, though. They have fallen 44% in value over the past year and now trade on a price-to-earnings ratio in single digits.
I recognise that a fall in house sales could hurt revenues and sales. But I expect renovations of existing properties to help support sales. In the long term, I reckon Howden’s robust business model could support a higher share price again.
JD Sports
I already owned shares in JD Sports (LSE: JD) before October.
Owning shares and watching them decline can cause investors to behave emotionally. JD’s decline of 55% over the past year is even worse than Howden’s.
That reflects concerns about management changes at the FTSE 100 retailer as well as the risk of inflation eating into profit margins. On top of that, if consumer discretionary spending falls, the market for sportswear could decline, hurting sales.
But as a long-term investor, I aim to behave rationally not emotionally. I take a similar view to JD as I do when it comes to Howden. I expect strong long-term demand in its market space. Within that space, it has an attractive position thanks to a large customer base, established brand, and proven business model.
Those assets could help support the business, which expects to deliver results this year in line with last year’s all-time record figures. I happily used the falling JD Sports share price as a buying opportunity for my portfolio.
Legal & General
A FTSE 100 share I had owned previously but no longer held coming into October was financial services provider Legal & General (LSE: LGEN).
But I saw a fall in the Legal & General share price as an opportunity to add the company back into my portfolio – and pounced on it. The shares are 20% lower than they were a year ago.
A worsening economy could hurt investment returns for the company. If that happens it may lead to sales and profits shrinking. But in the long term, I think the firm’s financial services expertise could help it attract and retain customers. It has a large customer base and very strong brand thanks to its multi-coloured umbrella logo.
Legal & General’s dividend yield of 7.9% is higher than many FTSE 100 peers. It should make the shares a useful addition to my passive income streams.