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Business is never easy. Over the past decades, certain sectors have gone in and out of favor. Companies can experience a drop in share price, before a new CEO or a change in strategy helps the business pivot and bounce back. These would be good value stocks to put in my Shares and Shares ISA, as the long-term returns could be high. Here are two ideas I'm looking at right now.
From the ground
Wizz Air (LSE:WIZZ) shares are down 43% over the past year. In fact, the stock is at its lowest level since 2015. It is true that this fact alone does not make it a value buy, but it does suggest that there is an opportunity.
The company has been struggling recently due to engine-related issues on some of its ships. Naturally, without getting planes in the air, capacity decreases, and so does revenue. Based on the latest August update, there doesn't seem to be a clear date for this issue to be resolved, which I think worries investors.
I accept this as a problem (and a risk going forward) but I don't believe this warrants such a strong downside. Taking a step back, the Wizz Air actually does pretty well. The 2023 results showed that income reached the highest level since before the pandemic. In addition, it posted its first profit since 2020, indicating that things are back on track.
Given the nature of short-haul flights, I think future demand should be strong. The reduction in interest rates should help ease the pressure on consumers, which could translate into more bookings for leisure trips around Europe.
A blip on the radar
Earlier this week (22 August), I wrote about JD Sports Fashion (LSE:JD) in detail. I flagged that the results for the quarter released were much better than I expected. An 11% jump in a day showed me that I was not alone in this surprise!
However, I still say the stock is a value play right now. It's down 7% over the past year, mostly due to a Q1 slump when it issued a profit warning. This was followed by disappointing results in May, when UK like-for-like sales fell by 6.4%.
The management team is focused on a rapid turnaround so that the business can return to the growth path it has been on in recent years. It is investing to diversify its income stream in the UK, demonstrated by the confirmed acquisition last month of US-based Hibbett. In addition, the business is focused “promotion discipline and continuously managed inventory”.
The risk is that expansion in North America is going badly, as Hibbett's store managers are expensive.
For JD Sports Fashion's track record, I think the year so far has been pretty gray. I believe both stocks would be good buys for my ISA and I am considering buying both. As a reminder, I don't have to pay capital gains tax on the proceeds from selling shares in my ISA. This makes it an attractive home for these long-term games.
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