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Talking about the state of my portfolio right now is easy as pie. So, I look around the market for top stocks to buy in an attempt to cheer myself up.
Here are two that really caught my eye.
Like many UK listed companies, credit checker Experian (LSE: EXPN ) has had a rather poor 2022. As I type, the shares are down 28%. It catches my attention.
Yes, there are risks here. It is reasonable to assume that a slowdown in spending will mean a reduced need for its services. Simply put, there is no need to check a person’s repayment history if they are not applying for loans and cards.
On the other hand, it is also logical to think that this is precisely the time when people and businesses shall seek credit in an attempt to deal with higher energy bills. So maybe trade will be resilient?
Regardless, Experian’s stock is now changing hands at a price-to-earnings (P/E) ratio of 21. While that’s not outrageously cheap at face value, we have to put it in context. The five-year average on this measure is a tumultuous 31. Viewed from this perspective, the current price looks like a cracking deal for a company that consistently generates fat margins compared to other stocks in the FTSE 100.
Another bonus is the income offered. A very affordable, almost 2% return also means I get paid to be patient.
A second top stock to buy, at least in my opinion, is real estate portal Move right (LSE: RMV). Like Experian, this firm has a rotten 2022 with shares tanking 39% as I type. Much of this decline has only come in the last month, as the market has become jittery about how further interest rate hikes will affect the housing market.
I’m not going to say that the market is overreacting here. With people already struggling with higher energy bills, it is logical to suspect that moving to a new property will not be high on their agenda. This can have an impact on profits for housebuilders, building suppliers and, frankly, any company involved in the sector.
Despite this, Rightmove is the kind of stock I would want to pick up on such concerns. As an online business, its costs are far below that of your typical brick and mortar related firm. Return on capital – essentially what a company gets back for the money it puts in – is consistently among the highest in the entire UK market. Theoretically, this should help my money compound at a better rate compared to a business throwing cash around, but for little benefit. Speaking of cash, Rightmove’s finances look seriously robust.
At 21 times expected earnings, shares in this market leader are also significantly cheaper than their five-year average (32 times). Lovely!
As I am also interested in acquiring shares in Experian and Rightmove, one must be aware that their prices may continue to fall for some time. Given that, it might be better for me to commit to pouring money into these stocks.
That said, I wonder how much pain has already been priced in. With markets in absolute funk, it won’t take much good news to bring out the bulls. Taking a long-term perspective will also help.