Over the weekend, news hit that the Omicron variant has already reached the UK. Rather than ruminate on this for long, I’m taking a proactive approach and searching for the best stocks to buy if things really do get out of hand. Here are three I like the look of.
Paper profits
Harry Potter publisher Bloomsbury (LSE: BMY) was a huge beneficiary of the three UK lockdowns we’ve had to date. Given that its shares actually rose in value last Friday, it seems I’m not alone in thinking it’s worth buying a slice of this company in case things get worse before they get better.
Bloomsbury boasts business characteristics I look for, even in less trying times. It’s in solid financial shape and margins are improving. Trading on a little less than 20 times earnings, the stock isn’t unreasonably valued in my book either. A 2.6% dividend yield is another attraction.
Of course, an issue with publishers is that they can never be sure that a particular title will be well-received. Still, books remain a staple of gift-giving during the festive season. So even if drastic action and restrictions on movement aren’t necessary, BMY should still do well. Having announced record half-year numbers last month, it’s clear the “reading surge” hasn’t stopped yet.
‘Buy-the-dip’ opportunity
Fantasy figurine maker Games Workshop (LSE: GAW) could be another of the best stocks to buy now if, dare I say it, we’re all required to spend a bit more time behind our doors in December. Like Bloomsbury, the £3bn-cap business was an identifiable ‘Covid winner’, rising 82% in value last year.
By sharp contrast, Games Workshop’s performance in 2021 has been rather less impressive, due to rising costs hitting sentiment. Further selling pressure has ensued in recent months as the company has sought to preserve its intellectual property and stop fans from making their own animations using its characters and settings.
Personally, I see this as an opportunity. In spite of a backlash from a minority of its customers, I reckon the purveyor of all things Warhammer should enjoy great trading in the run-up to Christmas.
At a little less than 25 times earnings, Games Workshop is on the expensive side. However, the firm’s defensive quality (not to mention sky-high margins) make this one I’d buy in both good times and bad.
Hedge against volatility
If more draconian restrictions are re-introduced, it’ll be a catalyst for an awful lot more volatility in equity prices. Cue lots of traders (experienced or otherwise) trying to profit from it. That could mean great business for online platform provider Plus 500 (LSE: PLUS).
Plus has got form here. After falling with everything else in March 2020 when the first lockdown was enforced, its shares quickly doubled in value as new clients signed up to play the recovery. The huge interest in cryptocurrency trading in particular did the FTSE 250 member’s top and bottom lines no harm at all.
Any potential weaknesses to the investment case? Well, Plus operates in a crowded market. Investors also need to remember that this line of work is never far from the regulator’s gaze. Notwithstanding this, Plus shares trade on a forecast P/E of just six. That offers what appears to be a great margin of safety. The 5.7% yield is also easily covered by profit.
Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Bloomsbury Publishing and Games Workshop. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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