The Stocks and Shares ISA is the world’s greatest investment product. It has a generous £20,000 contribution allowance you can use to target stock market wealth. Protection from capital gains tax and dividend tax also frees up more capital that can be invested to accelerate the compounding process.
Investing earlier on in the tax year too can have a powerful impact on wealth creation over time. As Angela Smith — senior investment director at asset manager Rathbones — notes:
Investing earlier in the tax year gives your money up to 12 extra months of potential compounding. You don’t need to use the full allowance at once — even smaller early contributions can make a meaningful difference.
Now’s an especially good time to consider investing in an ISA, too. Why? The London stock market is jam-packed with bargains that might not stay cheap for long. Here are three that have grabbed my attention.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
No penny dreadful
Penny stocks like Topps Tiles can experience severe share price volatility at times. In this case, an economic downturn that hits the building materials industry could cause some choppiness.
Yet I feel this scenario is more than baked into the firm’s rock-bottom valuation. It trades on a forward price-to-earnings (P/E) ratio of just 7.2 times.
I’m expecting Topps’ growth measures, like improving its digital and trade channels, to support earnings in the near term. Looking further out, I think profits could soar as the UK ramps up housebuilding activity. The advanced age of the country’s housing stock should also underpin strong demand from the maintenance, and improvement (RMI) sector.
All-round value
FTSE 250-listed share Investec offers terrific value based on both earnings and dividends. The asset manager’s forward P/E ratio sits at 7.6 times. Its dividend yield for this year, meanwhile, is 5.8%.
So why are Investec shares trading so cheaply? It chiefly reflects fears investor flows could slow amid uncertain economic conditions. The good news is the firm’s found ways to thrive despite tough conditions — operating income rose 4.2% in the 12 months to March.
I’m expecting this to continue. Longer term, I expect income and profits to balloon thanks to favourable demographic trends and rising interest in financial planning.
A FTSE 100 bargain?
JD Sports Fashion (LSE:JD.) is one of my favourite FTSE 100 shares for investors to consider in June. It’s on my own Stocks and Shares ISA watchlist right now.
Why? With a forward P/E ratio of 8.5 times, it offers once-in-a-decade value for money. That’s miles below the Footsie firm’s 10-year average of 15-16.
JD Sports’ been under the cosh more recently as rising consumer caution has hit sales. This remains a threat as inflation rises again and the Middle East crisis hits economic growth. But I think recent share price weakness represents an attractive dip buying opportunity.
I expect the shares to recover strongly over time as the ‘athleisure’ market steadily grows. With worldwide store expansion rolling on and the firm’s digital platform, I expects sales and profits to soar from today’s levels.
Should you invest £5,000 in JD Sports Fashion right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if JD Sports Fashion made the list?
Royston Wild does not hold any positions in the companies mentioned.
