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As October payday approaches, I'm thinking about what to do with the cash I'll set aside to invest. And there seems to be quite a few opportunities in terms of stocks to buy.
Despite the S&P 500 Overall, being expensive, I think there are some US stocks that look attractive right now. But the stocks that catch my eye the most are mainly in the UK.
JD Wetherspoon
JD Wetherspoon (LSE:JDW) is in a strange position. Sales have increased, costs have decreased, profits have (therefore) increased, but the share price continues to decline.
There are a few possible reasons for this. One is that there are inflationary pressures on the horizon and another is the possibility of increasing taxes and/or regulation in the next Budget.
However, in my opinion, there will always be reasons to distrust the business. But, in my opinion, the reasons for optimism are much stronger.
JD Wetherspoon's strategy involves keeping its own costs low and passing savings on to customers through lower prices. This is a model that has worked well for companies like costco.
However, business is not just about rewarding customers. Investors benefit from a competitive position that strengthens each time the gap between their prices and those of their rivals widens.
I have doubts that the company is about to start paying dividends again; I would prefer that you continue investing in your assets. But I still think this is a stock I'll buy in November.
Anglo-American
I didn't get to buy shares in Anglo-American (LSE:AAL) in October. It was probably a mistake I should try to fix next month.
The stock has risen approximately 4% over the last month and the market capitalization has reached £32bn as a result. However, I still think there is value at these levels.
Anglo American produces copper, iron ore, platinum, coal and diamonds. But it plans to sell some of its assets to focus on metals needed for the transition to renewable energy.
The sale of subsidiaries could generate significant costs and weak demand from China could affect copper prices. But while the risks are real, I think there is a margin of safety in stocks.
Between them, the platinum, coal and diamond operations generated £818 million in net income in 2023. Selling them at an average price-to-earnings (P/E) ratio of five should generate around £4 billion.
That implies a market value of £28bn for the copper and iron divisions, which generated around £3bn last year. In other words, it's a P/E multiple of around nine, which I think is a bargain.
<h2 class="wp-block-heading" id="h-value-stocks“>Value stocks
I have my value hat firmly on when it comes to finding stocks to buy in November. But that's mainly because that's where I think the best opportunities are right now.
Sometimes value comes from the market overestimating potential challenges and other times it is the result of underestimating a company's assets. Either way, it creates opportunities for me.
