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According to those who 'sell in May and go', the time to buy stocks is now. I'm not going for this strategy, but I'm still adding to my portfolio at the moment.
I FTSE 100 as well as FTSE 250 they went slowly. But a few quality stocks have gone down a lot and I think this presents an opportunity for an investor like me.
Rentokil
You share The first Rentokil (LSE:RTO) fell sharply in September when the company released its latest trading update. In doing so, it highlighted one of the key risks for the stock.
In 2022, the company spent more than £4.5bn to acquire Terminix – a major US rival. But so far, the expected growth in demand has not materialized, making this expensive.
Despite this, I think the stock looks attractive after a 20% drop. The explanation for this is that I expect the pest control market to grow for a number of reasons.
First, climate change – warmer summers and wetter winters that provide better breeding conditions for insects – is a big part of this.
I also expect Rentokil's presence in the US will prove useful in the long run. How soon is hard to say, but I think the company will be hard to compete with in the long term.
As an investor, that's exactly the kind of business I want to have. And while the market is concerned about short-term gains, I look at the bigger picture.
AG Barr
Honestly, I thought I missed my chance to buy shares AG Barr (LSE:BAG). But the 9% drop after the company's interim results made me change my mind.
Revenue rose 5%, but profit fell due to costs associated with closing its distribution operation. I don't expect these to be repeated, so I think the issue is temporary.
In their latest annual report, management outlined how to cut costs over the next few years. The guidance was for operating margins to reach 14.5% by the end of 2026.
The company has had a CEO change since then, making reliance on earlier forecasts risky. But if the expected efficiency occurs, the profit can increase significantly.
Achieving these goals would increase Barr's operating profit by 31%, even if sales do not increase continuously. If that happens, I think the stock will go up.
Since the stock is down, I don't think it's worth it at today's prices. That is why I have been buying it for my portfolio and plan to continue to do so.
Opportunities in the UK
For my portfolio, I look for stocks in high-quality companies that are trading at attractive prices. And I think there are opportunities right now, even if the stocks are completely stable.
Both Rentokil Initial and AG Barr are in that category, in my opinion. That is why I have been buying both recently and intend to continue to do so.
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