I’m buoyed by the number of UK shares that look too good to miss right now as markets struggle. One stock I’m adding to my holdings imminently is Ibstock (LSE: IBST). Here’s why.
UK shares continue to struggle
Economic turmoil throughout the world has pushed down many stocks. One of the biggest issues has been soaring inflation. To add to this, rising interest rates have spooked investors and many shares have struggled in the past few months. When you add in the unfortunate geopolitical events of late, especially the war in Ukraine, there is a bleak outlook, in my opinion.
Bricks and mortar
Ibstock is a leading manufacturer of clay bricks and concrete products with operations in the UK and US.
As I write, Ibstock shares are trading for 146p. At this time last year, they were trading for 185p, which is a 21% decrease over a 12-month period. Over a two-year period, the shares are down 36%. It is worth noting that many UK shares have experienced a similar fate in recent months and seen their share prices fall.
I believe Ibstock could benefit from an impending construction boom, especially here in the UK. There is a severe shortage of housing and demand is outstripping supply. Governments are pushing house builders hard to ramp up their building levels. In addition to this, infrastructure spending is another way that governments stimulate the economy during times of volatility. Both of these aspects could boost Ibstock’s earnings and returns. After all, it is the largest producer of bricks in the UK by volume.
Next, Ibstock shares look great value for money to me right now on a price-to-earnings ratio of just eight. The shares would also boost my passive income with a dividend yield of 6% right now, which is higher than the FTSE 250 average of close to 2%. However, I do understand that dividends are never guaranteed.
Risks and what I’m doing now
The biggest issues Ibstock could face are operational. As with any business producing a physical product, there is always the risk that a subpar or defective product could impact performance, returns, reputation, and investor sentiment.
Another short-term issue I’ll keep an eye on is demand for Ibstock’s products. Rising interest rates and a cost-of-living crisis has led to mortgages becoming harder to obtain, which is an issue impacting many other UK shares. So there is a chance housebuilders may slow down their building efforts until the rates and markets normalize. After all, they may struggle to sell completed homes which could cost them money. I view this as a short-term issue and because I invest for the long term, I’m not too worried here.
To conclude, I’m buying Ibstock shares for my holdings imminently. I plan on holding on to them for the long term, which I define as a five- to 10-year period.
Ibstock should benefit from rising levels of infrastructure and house building, which should translate into boosted future earnings and investor returns. At current levels, Ibstock is one of a number of UK shares I’m looking to add to my holdings due to an enticing valuation and passive income opportunity.
