If you’re thinking about what stocks to buy now, then according to Samantha Gleave, European Dynamic Fund Manager at Liontrust, it might be worth considering high-quality stocks that are undervalued.
Contrarian value investment opportunities tend to perform well over the long term, says Gleave, especially those with depressed investor sentiment.
Liontrust uses an “Investor Anxiety Indicator”, which has been an “effective gauge of market inflection points” in the past.
Today, he uses this gauge to uncover stocks that look cheap relative to their growth potential.
Here are three stocks to buy today based on this methodology.
Stocks to buy now
According to Gleave, here are the top actions to look at now:
Stocks to Buy for the Recession: Pandora
Liontrust acquires a Danish jewelry store Pandora (Copenhagen: PNDORA) at the start of the pandemic when the shutdowns forced the company to close most of its physical outlets.
“As economies began to reopen after Covid-19,” investor anxiety around Pandora began to ease and stocks rallied quickly.
Today, the business faces a different but not dissimilar operating environment. Over the past year, the stock has lost about half of its value due to concerns about consumer confidence.
Indeed, “Liontrust’s anxiety indicator has risen to a very high level”. This suggests that now may be the time to revisit this high-quality stock.
A healthcare leader: Novo Nordisk
Novo Nordisk (NYSE: NVO) is a global healthcare company with a leading position in the treatment of diabetes, obesity and rare blood diseases.
Gleave notes that this company “generates a high cash return on capital and reports strong business momentum.”
It is also achieving strong organic revenue growth, in part thanks to its “market leadership position” in the treatment of diabetic patients.
Novo is developing a pipeline of assets for the treatment of obesity and other serious chronic diseases, funded by cash flow from operations.
In addition to these growth features, it “gives money back to shareholders via dividends and share buyback programs”.
Rise in revenue as rates rise: Bank of Ireland
Liontrust first purchased Bank of Ireland (LON: BIRG) in 2020 as a “contrarian value stock” and he still thinks stocks are undervalued today.
Growing earnings thanks to higher interest rates, a “stronger balance sheet” and an attractive valuation are all reasons the company continues to hold the stock today, says Gleave.
There’s also the “potential for higher capital returns to shareholders” as the bank’s bottom line continues to grow.