I’ve been looking at quality UK shares to add to my portfolio for 2022. These two companies updated the market this week and their share prices have risen. In a week when stock markets have generally fallen, this is a good sign that the businesses are trading well.
Let’s take a look to see if these stocks are buys for my portfolio.
A UK share to profit from the booming housing market
The first company I’m looking at is Belvoir (LSE: BLV). It’s a property franchise group specialising in residential lettings and property sales. The share price has had an unbelievable run since the pandemic low at around 90p in March 2020. As I write, the share price is 260p which marks a near 200% return since then. There’s been some weakness lately though as the shares have dropped around 20%.
On Thursday, Belvoir released a trading statement for the 10 months to October saying that the company has performed ahead of the board’s expectations. Income grew across the group, with notable strength in property sales that the company said was “mainly a result of the strongest market for property transactions seen since 2007”.
I normally look out for franchise groups as an investor as they can achieve fantastic business economics. It’s up to the franchisee to invest any upfront costs, leaving the franchisor to collect an income from the potential profit. Indeed, Belvoir’s cash generation is excellent, and the business requires little cash investment itself. Last year’s operating margin was a stellar 31% too.
I have to keep in mind that Belvoir’s business is dependent on the housing market staying strong. Any slowdown in property sales or lettings and profits will fall. But I see this as a quality stock to keep in my portfolio as we head into next year.
A quality investment management company
I’ve also been looking at Liontrust Asset Management (LSE: LIO). It’s an investment management company offering a range of funds across various asset classes.
Liontrust released its half-year report to 30 September on Wednesday and it was very impressive, in my view. Adjusted profit before tax was £43.1m, which increased from £22.3m in the same period during 2020.
A key metric for an investment management company is assets under management and advice (AuMA) as this figure determines its income generation. Liontrust’s AuMA increased by 73% over the 12 months to £35.7bn.
One of the reasons I think Liontrust is a quality business is its operating margin. It’s able to generate double-digit operating margins consistently, and last year it was an impressive 37%. Not only this, but its return on capital is also consistently in double-digits.
A risk to consider before I buy the shares is that stock markets may crash next year. This would lower Liontrust’s AuMA, and therefore income would fall. But on balance, I still think this is a quality UK share for me to own for the long term.
Dan Appleby owns shares of Belvoir. The Motley Fool UK has no position in any of the shares mentioned. 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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