[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

ASOS

What it does: ASOS is an online fashion retail firm, comprising 17 different brands. It operates around the globe.

By Andrew Woods. My growth stock pick for October is ASOS (LSE:ASC). For the years ended August, between 2017 and 2021, earnings per share (EPS) rose from 77.2p to 128.9p. Over this period, the company had a compound annual EPS growth rate of 10.8%. I consider that to be consistent and strong.

However, ASOS has been operating in a challenging environment for the retail sector more generally. As the cost-of-living crisis has hit, customers have had less disposable income to spend on clothes. Inflation has also led to shrinking profit margins, as wages and costs increase. The share price reflects these problems, having fallen 82% in the past year.

Despite this, sales improved during the summer and the business expects full-year profits to be within the initial guidance range. Another indication that the company is in decent financial shape is its low levels of debt. This means it’s potentially well placed to work on expansion as we emerge from the pandemic.

Andrew Woods has no position in ASOS.

Kainos Group

What it does: Kainos is an IT support services business that helps companies, organisations and governments digitalise operations.

By Zaven Boyrazian. Kainos Group (LSE:KNOS) helps its clients digitalise operations and deploy Human Capital Management solutions through its partnership with Workday. The group serves the public and private sectors, with its most prominent collaboration being with the National Health Service.

Despite record double-digit organic sales growth, the stock has lost nearly a third of its market capitalisation in the last 12 months. It seems the recent drop in profit margins has spooked some investors. And given that the stock trades at a lofty premium of 47 times earnings, this volatility isn’t surprising.

The drop in profitability comes from the steady decline of pandemic tailwinds rather than internal issues. Meanwhile, demand for Kainos’ services continues to grow with a record level of bookings at £349.8m.

While it’s frustrating to see profitability wobble, the underlying business remains uncompromised. And with an impressive amount of potential, I believe the recent downward trajectory presents an attractive buying opportunity, even if the stock still looks expensive.

Zaven Boyrazian does not own shares in Kainos or Workday.

Halma

What it does: Halma is a collection of businesses focused on industrial safety, environmental monitoring, and life sciences.

By Stephen Wright. I’ve been buying shares in Halma (LSE:HLMA) over the last month. So I’m putting my money where my mouth is on this one. 

The reason I’ve started investing in this stock is that I think that it’s finally trading at an attractive price. The company has always looked great but expensive to me.

Halma has a straightforward business strategy. It attempts to acquire businesses and use the cash they generate to buy more businesses.

The company also has a decentralised corporate culture. In other words, it leaves individual businesses to get on with what they do well. 

Halma’s share price fell below £20 per share recently. At those prices, I think that it’s a terrific buy.

If the stock reaches that price again in October, I’ll be looking to increase my investment significantly. But I think Halma is a great company that I’m happy owning shares in.

Stephen Wright owns shares in Halma.

Spire Healthcare 

What it does: Spire Healthcare provides private healthcare services in the UK through 39 hospitals and eight clinics. 

By Royston Wild. The resilience of healthcare-related spending means stocks like Spire Healthcare (LSE: SPI) are popular picks during tough economic times like these.

Theoretically, Spire’s turnover might suffer as Britons start to feel the pinch. As times get tough, people could be tempted to wait that bit longer for treatment and get it for free on the NHS. 

But the size of NHS waiting lists today means that demand for private care continues to rise strongly. At Spire, revenues rose 7% in the six months to June as private revenues jumped almost 22% year on year.

A record 6.8m people were on NHS waiting lists in September. And the Institute for Fiscal Studies thinks the number will get worse before it gets better, possibly even hitting 10.8m people in 2024 before slowly falling. 

This explains why City analysts think Spire will report healthy earnings growth over the short-to-medium term. It’s expected to flip from losses of 7.1p per share in 2021 to earnings of 4.4p this year. And in 2023 earnings are tipped to double to 8.8p. 

Royston Wild owns shares in Spire Healthcare. 

Scottish Mortgage Investment Trust

What it does: Scottish Mortgage Investment Trust is one of the world’s biggest and most famous trust funds. The Baillie Gifford & Co fund invests globally and looks for strong businesses with above-average returns.

By John Choong. While Scottish Mortgage Investment Trust (LSE: SMT) has performed atrociously thus far this year, investors are told to expect a five-year return. As such, the current drop could pave way for a monumental recovery when the global economy eventually recovers.

The trust’s top holdings are mostly growth stocks, with the likes of Moderna and Tesla having plenty of upside to their earnings over the next decade, and could help boost the share price. Additionally, Scottish Mortgage has quite a healthy exposure to China. As the second largest economy in the world reopens from its Covid-19 lockdowns, Chinese equities are seeing steep rebounds, and Scottish Mortgage is expected to benefit from that to some extent.

Either way, with its share price down nearly 50% from its all-time high, this could be an opportune time for me to start a long-term position in a fund with historical success. That being said, investors should be wary that further lockdowns in China could prolong its road to recovery.

John Choong has no position in Scottish Mortgage Investment Trust.

Smithson Investment Trust

What it does: Smithson is a global investment trust run by Fundsmith. It invests in high-quality, small- and mid-cap growth stocks.

By Edward Sheldon, CFA. Smithson’s (LSE: SSON) share price has taken a big hit in 2022 as growth stocks have fallen out of favour and I think this has presented a buying opportunity. Currently, the investment trust is trading at a significant discount to its net asset value (NAV).

I like Smithson’s approach to investing. Like its big brother, Fundsmith Equity, it typically invests in companies that are highly profitable. Meanwhile, it avoids companies that are heavily leveraged, as well as those in industries that are rapidly changing. Names in the portfolio at the end of August included UK property website powerhouse Rightmove, medical technology company Masimo, and cybersecurity specialist Fortinet – all great companies.

It’s worth pointing out that the Smithson portfolio is quite concentrated. So, stock-specific risk is quite high. If a handful of stocks in the portfolio were to underperform, overall performance could be impacted significantly. I’m comfortable with this risk, however. I think Smithson is a good way to get exposure to smaller growth companies listed internationally.

Edward Sheldon has positions in Smithson Investment Trust, Rightmove, and Fundsmith Equity.

Hargreaves Lansdown

What it does: Hargreaves Lansdown is a United Kingdom-based digital wealth management service administering company.

By Paul Summers: The share price of Hargreaves Lansdown (LSE: HL) has been in awful form in 2022 and it isn’t hard to fathom why. 

At a time when most people are just trying to pay their energy bills, it was inevitable that revenue at the company would suffer. Combine this with a reduction in new business and assets under administration and the 35% fall, while severe, makes some sense. 

Even so, I do think this is shaping up to be an attractive contrarian play. A price-to-earnings (P/E) ratio of 17 isn’t screamingly cheap but it does seem a very enticing price for a company that generates some of the highest margins in the FTSE 100. Moreover, the desire of many to take more control over their finances will surely prove a decent growth driver for years to come. 

In the meantime, there’s a 4.7% forecast yield in the offing.

Paul Summers has no position in Hargreaves Lansdown

Spire Healthcare (LSE:SPI) is the UK’s biggest private hospital group by revenue, owning 39 hospitals and 8 clinics across the nation.

Even saying the phrase ‘private healthcare’ is enough to garner dirty looks in some social circles in the UK.

However, that piques my interest further. The less ‘sexy’ an investment theme is, the more chance I have of getting in at a reasonable price. Unpopular though they may be, private providers are playing an increasing role in the healthcare space.

In the first six months of 2022, Spire Healthcare saw revenue from private patients rise by 30.9% compared with the first half of 2019.

Pandemic loser’s time to shine?

During the height of the pandemic, Spire Healthcare put its buildings, equipment, and staff at the NHS’s disposal. The NHS paid the firm for services commissioned during this emergency period, of course. Still, it wasn’t enough to keep Spire Healthcare from suffering a loss (adjusted before tax) of £18.5m in 2020.

In 2019, Spire Healthcare had made an adjusted profit of 1.8 pence per share. By 2021, that had gone negative, with the firm losing 3.6 pence per share.

Still, the stock price kept on a steady march upwards despite the negative earning prints, from a 2019 high of 139p to 250p by the end of 2021.

That is because markets are forward looking, and it was clear that a massive patient backlog would be created by the NHS suspending elective procedures to focus on Covid.

First, the good news

Inflation is at the forefront of investors’ minds this year, and Spire Healthcare can plausibly claim to be less affected than most businesses. According to research carried out by the group, the “typical private patient is able to access the funds for private care, and healthcare is a key spending priority”.

In addition, Spire Healthcare says it has locked in supplier pricing over the medium term and that it is being selective in its product choices to further tame the impact of inflation on its bottom line.

The group has also lightened up its debt load just in time for the rising interest rate environment, paying down £100m of bank debt in Q1 of this year and getting its net debt to 2.2 times EBITDA, the lowest leverage ratio it has recorded since 2016.

A sacred cow…

The factors that are currently tailwinds for Spire Healthcare could quickly turn against it in my view. The NHS is a sacred cow in Britain, and I would not bet on private providers being able to capitalise on the public sector’s woes for long without political fallout.

In 2019, the Labour Party manifesto stated its ambition to end the use of private providers in the NHS. If enacted, that would have wiped out around one-quarter of Spire Healthcare’s revenue.

Considering Spire Healthcare’s rich price-to-earnings (P/E) ratio of 141, I think investors have become too euphoric without taking sufficient stock of the political risks.

For that reason, I wouldn’t buy shares in Spire Healthcare, despite the numerous headlines about patients turning to private providers in frustration at NHS waiting lists.

Buffett’s Berkshire Hathaway has owned a stake in Coca-Cola for an astonishing 34 years.

By owning shares for the long haul, the so-called Sage of Omaha eliminates the impact of temporary volatility on his returns. And he allows the strong fundamentals of the companies he holds to drive robust capital appreciation.

Spire Healthcare Group (LSE: SPI) is a share I think could deliver exceptional long-term returns. Here I’ll explain why I believe Buffett might even welcome it in his own portfolio.

Private party

Private healthcare provider Spire is a stock I’ve actually bought myself. I’m convinced that profits here will rise as people increasingly seek private medical treatment.

Spire’s revenues jumped 7.1% in the six months to June. The result powered adjusted operating profit 12.6% higher year on year. This was driven by “strong demand for private treatment” that drove such revenues up 21.6%, the company said.

NHS hospital waiting lists continue to grow and hit a new record high of 6.8m patients in England in July, official figures show.

Even if it gets significant extra funding, such waiting lists won’t reduce quickly. The government itself predicted in February that 10m people could turn to the NHS for treatment following the pandemic. And that’s likely to drive more people to the private sector.

Strong growth

This is why City analysts think sales and therefore earnings at Spire will rise sharply. The FTSE 250 firm recorded losses of 7.1p per share last year. And it’s expected to swing to earnings of 4.5p in 2022. Furthermore, in 2023 the business is expected to report earnings of 8.7p.

It’s worth noting that Spire shares trade on a forward P/E ratio of 52.9 times. This sort of high valuation reflects expectations of continued breakneck profits growth. And so signs of more modest growth could cause a sharp share price correction. That’s especially so if some people don’t turn to private healthcare because they have less cash available in a tough economy.

Still, in my opinion the benefits of owning Spire shares outweigh the dangers. The company is the country’s largest private healthcare provider by procedure numbers. Therefore it’s well placed to exploit its market.

A Buffett-like stock

As I said at the top of the piece, Spire carries certain qualities that Warren Buffett is a big fan of. It has a formidable competitive advantage. You see, a rival firm can’t suddenly arrive to set up a network of hospitals.

The company also has highly defensive operations. These, as its first-half results show, can generate profits growth even during economic downturns. Many of Warren Buffett’s holdings, like dialysis provider DaVita and consumer goods maker Kraft Heinz, share the same quality.

Like Buffett, I buy shares with a view to owning them for the long haul. And Spire is one I think could really boost my wealth.

But the reality is that oil and mining stocks have been hauling the index upwards when many other stocks are still trading at discounts versus this time last year. The FTSE 250, which is a better reflection of the health of UK-listed stocks, is down 14% over the year. While the UK’s largest company, Shell, is up 50% over 12 months.

So, here are the top two shares I’d buy more of before the market really recovers!

Vistry Group

Share prices in the housing sector are down considerably this year despite many developers making record profits. Vistry Group (LSE:VTY) is actually performing far better than it did before the pandemic.

Pre-tax profit is expected to come in at the top end of market forecasts, at £417m. That’s far above pre-pandemic levels and some way above the £319m achieved last year. It’s currently offering a 6.66% dividend yield.

But interestingly, it’s currently trading for 900p a share, that’s down from highs of nearly 1,500p before the first Covid-19 lockdown.

However, there are some issues weighing on the share price. Firstly, interest rates are rising and that’s expected to have a negative impact on demand for new homes. Several core indicators are suggesting that we’ve now reached a turning point and that house prices will start falling as a result.

And then there’s the matter of the cladding crisis. Vistry Group expects its fire safety pledge will cost it between £50m and £70m. That’s a substantial figure, but it’s way less than many other developers, some of which will see a whole year’s profits wiped out after committing to the government scheme to reclad thousands of homes.

But the long-term trends, I contend, are very positive. Demand for housing in the UK will stay strong as there’s a fundamental shortage of homes. And Vistry has reported a strong order book that should help it navigate the coming months.

Spire Healthcare

Berenberg recently initiated coverage on Spire Healthcare (LSE:SPI) with a “buy” rating and price target of 300p. The brokerage highlighted its belief that the private hospital group is well placed to benefit from a record NHS waiting list that should result in a surge in both NHS referrals and private demand.

This has been my position for some months. Hospital waiting lists for elective surgeries are far into the millions, and private hospitals offer a solution. I also see private hospitals gaining more business as the NHS struggles with staffing issues.

Spire also recently announced a four-year partnership with Bupa, which should enhance revenue. The contract is inflation-linked.

The group also recently said that it was targeting a return to dividend payments in 2023, and outlined plans for a sustainable dividend policy of 25%-40% of profit after tax.

Covid-19 is still an issue here as it will continue to cause disruption for years to come, but the prospects look good and I’d buy more of this stock today.

The pandemic triggered a surge in fresh funding from governments and investors alike. And with this capital being allocated across a broad spectrum of research projects, the quality and quantity of healthcare products are forecast to rise rapidly. As a result, analysts predict the market opportunity for healthcare stocks will grow annually by double-digits over the next decade.

This obviously presents a potentially lucrative opportunity for investors. So, let’s explore the risks and rewards of investing in healthcare shares a bit further. 

What are healthcare stocks?

Healthcare stocks lie at the heart of the medical industry. And as the name suggests, these businesses are focused on maximising the quality of patient care to let people live longer and healthier.

Typically, healthcare shares can be organised into one of four categories:

• Healthcare providers – These firms are on the front line, delivering healthcare to patients first-hand. Such businesses include hospitals, physician practises, nursing facilities, and more recently, telehealth providers.
• Drug developers – Companies engaged in researching and developing new treatments and medicines to tackle diseases, infections, mutations, and disorders.
• Medical device designers – Groups designing and manufacturing devices to improve the quality of patient care. This can range from something as simple as a stethoscope to as complex as surgical robots.
• Payers – While less common in the UK, this segment includes all the businesses involved in helping cover medical costs like health insurance providers and pharmacy benefit managers.

This is by far one of the largest and most complicated industries to operate in. Due to the high degree of importance and expertise needed when handling patients’ lives, regulations are extremely strict. And, in some cases, create prohibitively expensive barriers to entry.

For example, both drug developers and medical device designers need to receive regulatory approval in each country where they wish to offer their products. 

Industry challenges

Here in the UK, that regulatory body is the Medicines & Healthcare Regulatory Agency (MHRA). In the US, it’s the Food & Drug Administration (FDA). And since every regulator has different standards and requirements, the price of checking off all the boxes gets expensive very quickly.

An approval prerequisite for drug developers requires clinical trials that can take over a decade to complete. Medical device designers need to demonstrate the safety and efficiency of their products with field data that’s expensive to gather.

Healthcare providers have to undergo similar approval processes, and payers are subject to significant financial oversight.

To put it simply, life is not easy for healthcare stocks. But for those that can overcome these regulatory hurdles without going bankrupt, an enormous market opportunity lies ahead. According to a 2020 report by the World Health Organisation, $8.3trn is spent annually on healthcare. That’s 10% of global GDP! And it’s still rising.

Therefore, it’s not surprising that some of the best-performing shares over the years operate within the healthcare sector. With that in mind, let’s explore the top five healthcare providers on the London Stock Exchange in order of market capitalisation.

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Top healthcare shares in the UK

AstraZeneca

AstraZeneca is one of the largest pharmaceutical companies and healthcare stocks in the world. Given its access to vast resources, the group develops new treatments for a wide range of diseases. The list includes cancer, cardiovascular, renal respiratory diseases, and immunology and other rarer conditions. 

It already has a diverse portfolio of products on the market and, more recently, is known for its Covid vaccine. Looking at the current project pipeline, AstraZeneca has 183 drug candidates being researched, with 16 in late-stage development and two under regulatory review.

Key Metrics:

• Market cap: £157.2bn
• Average daily volume: 2.39m 
• HQ: Cambridge, UK
• Cash/debt: $6,398m/$30,781m

GlaxoSmithKline

GlaxoSmithKline is a global leader in vaccines and pharmaceutical treatments targeted at cancer, HIV, immuno-inflammatory, and respiratory diseases. The healthcare company has established research teams and manufacturing facilities worldwide, providing a global distribution network, particularly across the US, Europe and Asia.

With over 1,500 active partnerships with external pharmaceutical organisations and governments, GlaxoSmithKline stands out amongst the crowd of healthcare stocks. Until recently, It also had a consumer healthcare division that has since been spun off into its own company called Haleon. The group is now purely focused on developing new treatments.

Key Metrics:

• Market Cap: £67.45bn
• Average Daily Volume: 6.67m
• HQ: Brentford, UK
• Cash/Debt: £6,532m / £22,111m

Smith & Nephew

Founded in 1856, Smith & Nephew is one of the oldest medical device manufacturers in the world. The group operates in over 100 countries, supplying medical institutions with critical equipment and consumable accessories.

The healthcare stock is renowned for its expertise in wound management with its diverse portfolio of dressings, as well as products tackling other areas. The list includes orthopaedic reconstruction (knee, hip, and shoulder joint replacements), hospital imaging systems, trauma fixation products, and tools performing a variety of medical procedures.

Key Metrics:

• Market cap: £10.9bn
• Average daily volume: 2.64m
• HQ: London, UK
• Cash/ebt: $1,290m/$3,339m

Hikma Pharmaceuticals

Hikma Pharmaceuticals is a global drug developer with a massive portfolio of over 670 generic and in-licensed products on the market today. The group’s expertise in replicating off-patent medicines drastically reduces costs for patients while simultaneously improving accessibility.

Beyond the generics, Hikma also has its own drug development pipeline for new and bespoke treatments that target various therapeutic categories such as anti-infectives, cardiovascular, central nervous system, diabetes, cancer, respiratory, and pain management.

Key Metrics:

• Market cap: £3.83bn
• Average daily volume: 1.07m
• HQ: London, UK
• Cash/debt: $450m/$846m

Spire Healthcare

Spire Healthcare is the UK’s largest independent hospital stock serving the private healthcare sector. The company has 47 facilities scattered across the country, providing the standard range of services, including diagnostics, inpatient care, and outpatient care.

The group collaborates with almost 8,150 experienced consultants to handle a long list of medical circumstances such as orthopaedics, gynaecology, cardiology, neurology, oncology, and general surgery.

Key Metrics:

• Market cap: £826.5m
• Average daily volume: 865.41k
• HQ: London, UK
• Cash/debt: £203m/£1,265m

Investing in the US healthcare industry

American healthcare stocks are bound to the same degree of regulatory restrictions. However, US healthcare spending represents almost half ($3.8trn) of the entire market worldwide. So, it’s hardly surprising that there is a far longer list of healthcare shares across the pond for investors to choose from.

Some of the leading names in this sector on the New York Stock Exchange and Nasdaq, in order of market capitalisation, are:

1. Pfizer Inc (NYSE:PFE)
2. Intuitive Surgical (NASDAQ:ISRG)
3. Moderna (NASDAQ:MRNA)
4. Masimo (NASDAQ:MASI)
5. Teladoc (NYSE:TDOC)

Are healthcare stocks right for you?

While healthcare shares are often perceived as a relatively stable and safe place to invest, that’s often not the case. As I’ve already explained, the costs of operating in this sector are exceptionally high, especially for drug developers. 

Consequently, these firms are typically highly leveraged, with enormous credit facilities being used to fund research, development, trials, and eventually manufacturing. That creates quite a bit of risk. After all, if a product fails during development or regulators decide it isn’t safe, a lot of capital can go down the drain.

Needless to say, this can make investing in healthcare stocks a risky endeavour. Even more so when it comes to the smaller players with restricted access to precious external financing. 

That means healthcare shares probably aren’t suitable for everyone. But for those willing to take on the risk, there is a multi-trillion-dollar market opportunity available to profit from. And by taking a diversified approach, investors can potentially reap substantial returns through multiple channels.

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Disclosure

Zaven Boyrazian owns shares in Masimo, Intuitive Surgical, and Teladoc.

Buffett has made billions of dollars with his Berkshire Hathaway firm by buying shares when stock markets fall. His approach centres on finding value in falling stocks and watching them rise over the long term.

Stock markets have rallied in more recent days. But the multiple challenges facing the global economy — and the fragile state of investor confidence — means another Buffett-style buy-on-the-dip opportunity could be just around the corner.

2 Buffett-like stocks I’ve bought

When picking which shares to buy, Buffett looks for companies with strong ‘economic moats.’ This term is used to describe an advantage that a business has over competitors. Such moats can enable a company to keep growing its market share and profits over the long term.

With this in mind here are two UK stocks with economic moats I think Buffett might love.

Games Workshop

Economic moat: market-leading products

The fantasy wargaming sector is huge and growing rapidly across the world. And thanks to its Warhammer 40,000 game format which launched in 1987, Games Workshop (LSE: GAW) sits at the top of the industry.

Revenues at the business soared to record highs above £350m in the last financial year as its fanbase continued to grow.

Games Workshop’s Warhammer Age of Sigmar game is also growing rapidly following its launch in 2015. And the business is seeking to supercharge royalty income by licencing its intellectual property to other media, like video games.

The company could see revenues growth weaken as consumer spending comes under pressure in key regions. But niche product makers and retailers like Games Workshop could weather the storm better than those who sell mainstream goods.

Spire Healthcare

Economic moat: barriers to entry

I’ve bought Games Workshop shares for my portfolio. And I’ve also invested in Spire Healthcare (LSE: SPI) because of soaring demand for private healthcare. That’s despite the problem of rising labour costs to the company.

This Buffett-like stock operates almost 40 hospitals and several clinics in the United Kingdom. It takes vast amounts of capital to build and staff healthcare facilities like this. This is something which bars competitors from easily setting up and eating into Spire’s market share.

As I say, the number of private healthcare patients is booming right now. And as an investor in the sector I stand to make a lot of cash. Research shows that 69,000 people self-funded their medical treatment in the final three months of 2021.

This was up 39% from pre-pandemic levels. And this is in addition to the soaring number of people who are obtaining treatment through medical insurance. I expect patient numbers at the likes to Spire to keep surging as NHS waiting lists rapidly grow.

Spire Healthcare

Private hospital operator Spire Healthcare (LSE: SPI) is a UK share I’ve already bought for my Stocks and Shares ISA. I’m considering upping my holdings too as waiting lists for free treatment keep growing.

The British Heart Foundation said on Thursday that wait times for cardiac care grew for a 22nd straight month in April to an all-time high of 319,366 people. Lists are climbing across the NHS and this is driving patient numbers at the likes of Spire through the roof. Private patient revenues at this particular provider rose at a record pace in 2021.

I think stocks like this could be better placed than many others to weather the economic downturn as well. This is because spending on healthcare tends to remain broadly unchanged, even during bad times. Good health is something we can’t afford to take for granted.

I’m considering buying more of Spire despite the threat that rising staff costs pose to profits.

The Gym Group

Investing in companies that offer cheaper goods and services could work for me as consumer spending power falls. One way I’m thinking of doing this is by buying The Gym Group (LSE: GYM) shares.

People don’t stop working out when times get tough. They might however choose to do it at lower cost by joining a gym with cheap membership costs like The Gym Group. In fact, this operator’s low-cost model has helped turbocharge member levels since re-opening last April. It had 718,000 on its books at the end of 2021, up from 547,000 10 months earlier.

I could be tempted to buy the share today and hold onto it for the long haul too. I like its plans to significantly expand its gym network from 206 sites to above 300 by 2025.

The fitness industry is competitive, and The Gym Group will have to paddle hard to keep growing membership numbers. Still, I find the rate at which it has added members over the past year highly encouraging.

Bloomsbury Publishing

Reading is a relatively cheap pastime. So it makes companies involved in the book trade like Bloomsbury Publishing (LSE: BMY) attractive investments for me during this cost of living crisis.

The company’s exceptional trading news this week has boosted my appetite. Sales and profits rocketed 24% and 40% respectively to new highs in the last fiscal year (to February) as the upswing in book demand seen during the pandemic carried on.

I like Bloomsbury for other reasons too. It’s the home of Harry Potter, a cash cow whose sales continue to grow decades after launching. I also like the company’s successful foray into the realm of academic literature.

I’d buy the business even as soaring paper prices put profit margins under strain.

I haven’t sold any of my shares though. And I have no plans to do so. In fact, I’m searching for the best bargain stocks to buy following this recent round of heavy selling.

Taking a long-term view

I’m someone who invests with a long-term view in mind. And there are stacks of terrific UK shares I think might make me terrific returns, regardless of any near-term problems.

Here are two sinking stocks I think could be too good to miss following market volatility.

#1: Spire Healthcare

Private hospital group Spire Healthcare (LSE: SPI) has slipped to its cheapest for almost a year on Thursday. I think it’s a great buy though as Britain’s free healthcare service goes from bad to worse.

Spending on healthcare tends to remain stable even when economic conditions deteriorate. Our health is one thing that we can’t afford to skimp on, right? So I think the market has overreacted by heavily selling this UK share.

Today, news emerged that NHS waiting lists hit fresh record highs of 6.4m in March. This was up a staggering 200,000 month-on-month.

The government expects lists to keep growing too, which I think should continue driving patient volumes at Spire Healthcare higher. The number of self-pay patients at the company’s hospitals and clinics soared 115% year-on-year in 2021 as people turned their backs on the NHS.

My only concern with Spire Healthcare is its elevated earnings multiple. Despite market volatility, the business trades on a forward price-to-earnings (P/E) ratio of 43.6 times.

Stocks that carry high valuations can suffer extra-heavy sell-offs if newsflow disappoints. That said, I believe the possible long-term rewards of owning Spire still make it an excellent buy for me.

#2: Sylvania Platinum

I’d also load up on Sylvania Platinum (LSE: SLP) shares following fresh erosion in its share price. Its metals are critical materials in autocatalysts where they’re used to reduce car emissions. I think profits here could soar as the fight against climate change intensifies.

This week the European Parliament passed a law requiring carmakers to accelerate their pollution-cutting plans. It will require them to reduce carbon emissions by a fifth by 2025.

Climate change is a global issue and Sylvania Platinum could see demand for its material take off over the next decade. Sinking car production rates due to supply chain issues threatens company revenues in the near term. But the gradual transition to greener technologies presents opportunities that I find hard to ignore.

At 88p per share penny stock Sylvania trades on a forward P/E ratio of just four times. It also carries an enormous 5.6% dividend yield. I think this could be one of the hottest stocks for me to buy following recent market volatility.

While the UK is expected to return to its pre-pandemic GDP levels in mid-2022, some analysts are also forecasting a recession. There are several factors that could plunge the UK into a recession, including soaring inflation, and interest rate rises.

So here are three stocks I’ve recently bought or am looking at to help safeguard my portfolio against an economic downturn in the UK.

Bank of Georgia

Naturally, the Bank of Georgia‘s (LSE:BGEO) performance is closely aligned to economic data in Georgia and not the UK. The bank’s performance was good in 2021, buoyed by strong economic data. The economy grew by 14.6% year-on-year and the Bank of Georgia in turn posted a pre-tax profit of £192m, more than any year in the last five. 

The Tbilisi-based bank’s share price fell following Russia’s invasion of Ukraine — both countries are major trading partners.

But I see BGEO as a good buy because I think the economic fallout from the war has been too heavily factored into the share price. For me, the Bank of Georgia looks very cheap with a price-to-earnings (P/E) ratio of just 3.4. The Georgian economy is still expected to grow this year, by 2.5% and in the long run, I see Georgia as a high-growth market.

Spire Healthcare

Historically, the healthcare sector, notably in the US, has been called recession-proof. However, that doesn’t always hold true as recessions cause job losses and people lose their private healthcare benefits.

But right now in the UK, there’s a massive backlog of patients waiting on elective treatments. I think Spire Healthcare (LSE:SPI) is in a good position to benefit from record waiting lists in the UK. In England alone, there are now more than 6.1 million people waiting on elective procedures and there’s political will to reduce this.

In March, Spire announced a big rise in annual profit, driven by “significant” demand for private treatment. Revenue also climbed above £1bn for the first time. Moreover, the pandemic seemingly drove more people to purchase private health insurance or pay for treatment as the NHS struggled, according to new research from the Institute for Public Policy Research.

National Express

National Express (LSE:NEX) has to be one of the cheapest ways to travel in the UK and that’s why I see it as a stock that will do well if the economy changes direction. From my own experience, the coach operator can get you from London to Bristol on a Friday evening for 10% of the price of a train. As fuel prices increase, it seems likely that some people will swap car journeys for the coach. 

The firm struggled during the pandemic but appears to be through the worst. I also think it will benefit from the move towards greener options as people ditch car journeys. The UK Climate Change Committee actually predicts that between 9% and 12% of car journeys will switch to bus journeys by 2030.

National Express hedges fuel, so the current spike shouldn’t impact margins too heavily. Although a resurgent Covid could hurt demand.

It’s worth noting that growth stocks are not the core part of my portfolio. I favour passive income stocks and there are several reasons for this. High dividends can negate the current inflationary pressures. But also, inflation-related uncertainty and higher interest rates can undermine the potential of growth stocks. In other words, it-s a play-off between uncertain long-term growth or stocks promising (but not guaranteeing) a dividend now.

I’ve chosen these two stocks because I feel that they’ll benefit from market conditions and grow.

Spire Healthcare

The Spire Healthcare Group (LSE:SPI) is in a good position to benefit from record waiting lists in the UK. This FTSE 250 stock operates dozens of private hospitals and clinics across the country and demand for its services is rising. In England alone, there are now more than 6.1 million people waiting on elective procedures. There’s considerable political will to reduce the waiting list and I think private healthcare providers stand to profit. 

Research by the Institute for Public Policy Research suggests that the pandemic prompted more people to purchase private health insurance or pay for treatment as the NHS struggled to keep up with demand.

In March, it announced  a strong rise in annual profit, driven by “significant” demand for private treatment. Revenue for the year climbed above £1bn for the first time, with 20.3% growth year-on-year. Spire also said there may be further upside if Covid-19 prevalence reduces, leading to fewer cancellations and staff absences.

However, a resurgent virus could severely hamper operations and the company’s revenue.

The stock is currently trading at 226p a share, that’s up over the last two years, but considerably down on where it was two years ago.

National Express

National Express (LSE:NEX) has plenty of upside potential having suffered during the pandemic and in its aftermath. The stock is currently trading just above 232p a share. That’s considerably down on its year high of 337p per share and less than half of its pre-pandemic peak. 

While National Express has demonstrated its resilience in coming through the pandemic, I believe it will grow amid inflationary pressure on consumers and the long-term impact of the green agenda. With current inflation levels, National Express represents a cost-efficient travel option. From my own experience, the coach operator can get you from London to Bristol on a Friday evening for 10% of the price of a train. As fuel prices increase, it seems likely that some people will swap car journeys for the coach.

I also think the firm will benefit from the move towards greener options as people ditch car journeys. The UK Climate Change Committee actually predicts that between 9% and 12% of car journeys will switch to bus journeys by 2030. Soaring fuel prices may accelerate this transition.

While it hedges fuel, high prices for the long term could impact margins. Meanwhile a resurgent Covid-19 could dent demand. I stopped using National Express when Covid hit Britain in 2020.

I’ve recently bought both of these stocks for my portfolio.