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Buying hard-hit UK stocks can be a good idea, as positive momentum can keep the share price moving higher. However, there is also a case to be made for buying stocks that are going down in value. The strategy I have here is that the share price may bounce back in the long term, banking me some solid profits.
Here are two ideas I have on my watch list right now.
From the ground
The first one is Wizz Air (LSE:WIZZ). Down just over 40% in the past year, the stock just hit a 52-week low.
Much of this fall has come in the past few months, with a disappointing earnings report since early August. Operating profit decreased by 44.2% compared to the same quarter last year. This was due to the fact that “The well-documented issues surrounding Pratt & Whitney's GTF engines resulted in the grounding of 46 neo aircraft during the quarter.“.
Naturally, if the flight is grounded, it will not make Wizz Air any money from the flights. However, although this is painful, it is not a long-term problem. In fact, the business reported a 1% increase in passenger numbers in August despite this issue! Once this storm has passed, I expect the share price to rally over the next year.
Wizz Air continues to push forward, looking to take on more long-haul options. This includes a new low-cost route from London Gatwick and Jeddah in Q1 next year. This has the potential to really increase profits.
Looking for bids
Another option Auction Technology Group (LSE:ATG). I FTSE 250 the company was down 47% last year. I put this down to lower earnings per share from the half-yearly report, as well as a slower annual growth rate.
For example, the company doubled its revenue from 2020 to 2021, and nearly doubled in 2022. So while the business grew revenue by 13% last year, this was seen as a disappointment by some investors. A high benchmark some people have no risk of going forward.
The 54% half-year decline in earnings per share can be explained in part by higher investment costs during the period. The CEO commented as such “Where we have planted, we growg”. This indicates that investors will see future benefits for the costs incurred now.
I think the market is overreacting and that the stock looks like a good buy. It has a strong hold on the online auction market. It's not an easy place for a new company to break into. In addition, with increased spending on new capabilities and add-ons, I see it attracting more customers going forward.
I think both UK stocks look attractive and I have them on my watch list to consider buying.
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