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Many UK stocks are currently trading low, thanks to all the economic turmoil related to inflation and interest rates. However, as a long-term investor, the problems plaguing the stock market today are, in my opinion, short-term problems that many top-tier, high-quality companies will be able to handle.
With that in mind, I’ve spotted two stocks that seem like obvious buying opportunities, even if you only had as little as £100 to invest. We’ll see.
One of the best UK stocks to buy right now?
XP Power (LSE:XPP) has been on a rough patch lately, with its share price down more than 60% in the last 12 months.
As a quick reminder, the company is an electronic component manufacturer that works directly in the engineering, medical, and semiconductor manufacturing industries. Therefore, it should come as no surprise that disruptions in global supply chains have created many obstacles for this business.
Revenue growth has stagnated while order book and lead times continue to increase. Sourcing of raw materials is proving to be a challenge. More so, since its manufacturing facility is located in China, where strict Covid-19 policies are still in place. To add fuel to the fire, your competitor Comet Technologies accused XP Power of stealing trade secrets that a US jury awarded $40 million in damages against the signature.
With all that in mind, seeing these UK stocks sell off isn’t all that shocking. But while these developments are frustrating, the long-term strategy of this business ultimately remains unchanged. At least, that’s what I think.
Management is still continuing expansions of its facilities to bolster manufacturing capacity once supply chain disruptions end. It has £189.2m in liquidity to work with against just £105.8m in short-term liabilities. And while the $40 million legal bill is not a pretty sight, it is ultimately a one-time expense.
In the short term, volatility in XP Power’s share price may continue. But as a long-term investment, it seems like an obvious purchase for my portfolio, despite the risks.
Stock Pick #2
Another British business hit recently is Howden Joinery (LSE:HWDN). Shares of the UK kitchen supplies supplier have fallen nearly 40% in the last 12 months. And it is not difficult to understand why.
With consumer spending on discretionary items like home renovations steadily declining and the homebuilding industry beginning to slow, many investors are expecting Howden Joinery to do the same.
But looking at the latest results, it seems that someone forgot to tell the company. As revenues continue to grow in double digits, profit margins are rising despite inflationary pressures, and the company is capturing more market share through expansion of its deposit network.
Management has admitted that if the housing market or consumer confidence continues to suffer, maintaining its current momentum could prove challenging. Obviously, this is a significant risk to consider before making an investment decision.
However, with a P/E ratio of just 10 and a tasty 3.4% dividend yield, these UK stocks look like a bargain, to my eyes. That’s why I added them to my income portfolio last week.