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Three UK stocks that I think could soar in 2024 are B&M European Value (LSE:BME), Rolls-Royce (LSE: RR.), and Ashtead (LSE: AHT). This is why!
What do they do?
In the famous words of Jay-Z, “Allow me to reintroduce myself.”.
B&M is a discount retailer that has seen strong organic and acquisition-based growth in recent years.
Rolls-Royce is perhaps the best-known of the three stocks and one of the largest aerospace companies in the world.
Last but not least, Ashtead is an equipment rental company serving the construction industry and, like B&M, has seen huge growth in recent years.
My investment case
B&M has captured a large market share, especially in recent years, as the focus and popularity of budget products and discount retailers has increased. The recent macroeconomic volatility and cost of living crisis have significantly boosted B&M in terms of share price, performance and profitability. This could well continue as there are no signs of volatility slowing down. Additionally, the company is looking to increase its international presence, which could help it scale as well.
B&M shares appear to be good value for money with a price-to-earnings (PE) ratio of 16 and offer a dividend yield of 2.6%. However, I am aware that dividends are never guaranteed.
Rolls-Royce seems to be emerging from the quagmire it found itself in during the pandemic period. A shrewd turnaround strategy has allowed it to pay off debt, turn a profit and potentially make a difficult turnaround. I think this can continue, especially since the aerospace market is booming and the engine manufacturer has a stellar reputation in terms of its products combined with a global footprint.
Rolls-Royce shares have soared since mid-2023, but I think there's still a way to go!
It is worth remembering that renting equipment is more profitable for construction companies, which has helped Ashtead grow. I think 2024 could be a big year for the company, especially in the US where it makes most of its money, due to a potentially lucrative infrastructure bill that could help boost performance and profitability.
Ashtead shares appear to be good value for money with a P/E ratio of 14 and offer a dividend yield of 1.5%, as I write.
Risks and my position
B&M's acquisitions have been excellent to date. However, there is always the possibility that a poor choice when acquiring a new business could be detrimental. Failed acquisitions are costly to unwind and can hurt confidence, balance sheets and returns.
Despite Rolls-Royce's recent resurgence, the company still has a lot of debt to pay off. This is complicated in a higher interest environment, as servicing debt is more costly. This increase in costs may hurt future growth plans.
Continued economic turbulence presents a short to medium-term risk to Ashtead's performance. Construction has slowed due to recent volatility and therefore demand for rental equipment could also decrease. This could harm performance and profitability.
To conclude, I already own B&M shares and may want to buy some more soon. Also, as soon as I have some cash to invest, I'll be looking to add some Rolls-Royce and Ashtead shares to my holdings as well.
