With my Stocks and Shares ISA, I’m looking for long-term opportunities. That means companies that are going to make a lot more in future than they do at the moment.
A lot of the time, this can be because a business is facing some short-term difficulties. And I think this could be the case at the moment.
US consumer slowdown
Earlier this week, the CEO of Dollar General issued a troubling update. According to the company, its customers – typically US households with annual incomes below $35k – are under pressure financially.
The report revealed that many are using credit cards to pay for basic needs. On top of this, around 30% have a credit card that has reached its limit and 25% anticipate missing a payment in the near future.
Interestingly, though, households with higher incomes don’t seem to be feeling the same pressure. While they’re conscious of their spending, they aren’t actively trading down as much as they might be.
That’s bad for Dollar General, whose stock fell by around 33% on the news. But it gives investors like me something to think about when looking for stocks to buy in September.
Long-term investing
A weak consumer means short-term profits are likely to be lower than anticipated for a number of companies. And one of these is Dr. Martens (LSE:DOCS).
The company is listed in the UK, but around 37% of its revenues come from the US. And it targets the kind of consumer that Dollar General identifies as being cautious, rather than endangered.
Operating in an industry where consumers can easily switch to cheaper alternatives can be risky. And the business has been struggling lately, which has caused the share price to fall.
Management is suggesting that a recovery could take some time. But I think Dr. Martens has two important attributes that could make the stock a good long-term investment.
Surviving and thriving
The first thing a business needs during a difficult time is a strong balance sheet. This is what allows it to make it through a crisis to the other side – a necessary condition of future success.
Dr. Martens does have this. With around £368m in net assets, the company should be able to survive for the foreseeable future even if profitability is depressed for some time.
The other important asset is a strong brand. This should help keep the company relevant in the minds of customers when they find themselves in a position with greater spending power.
Again, this is something Dr. Martens has. Its boots are well-known for quality and durability, making them popular when consumers feel able to spend money on premium footwear.
Investing £1,000
According to its management, 2025 is going to be a transition year for Dr. Martens, before things improve in 2026. Any investment therefore needs to be made with a long-term view.
For someone looking to invest £1,000 each month, though, this could mean there’s a chance to build a significant stake before prices recover. I think that could be well worth considering.
Whether it’s Dr. Martens or a different stock, though, I’m looking for shares that are trading at an unusual discount. That’s where I think I’m likely to find the best opportunities.
This post was originally published on Motley Fool
