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Last year’s bear market for many FTSE shares is fast becoming a distant memory. And even the general economic news is getting brighter.
And I reckon gloomy market sentiment looks like it’s beginning to change among many investors. However, early optimists have done very well in the stock market over recent months. Indeed, looking back, perhaps the optimum time to become interested in shares was back in the autumn, around October.
A multi-year bull run ahead?
But the general news back then was grim. And the situation seems to prove that a contrarian approach to investing in stocks and shares can prove to be lucrative. After all, the stock market is known for looking ahead. And when stocks began to turn back up last year, early-bird investors were looking beyond the immediate problems that had caused share prices to plunge in the first place.
However, just because the first moves higher are behind us, it doesn’t mean investors are too late to buy stocks now. Instead, there’s a good chance we could still be near to the beginning of a multi-year bull run for shares. So I’ve been working hard on my watchlist and buying stocks to hold for the long term.
For example, I like the look of DS Smith, the sustainable packaging solutions, paper products and recycling services company. In December, the directors delivered a robust set of numbers with the half-year report. And the outlook statement was optimistic.
But I’m also keen on residential housebuilder Taylor Wimpey (LSE: TW). In January, the company issued a workmanlike trading update. But the outlook statement guided expectations lower.
Lower volumes ahead
The directors said the ongoing market uncertainty means that sales are “significantly below” the levels prior to the rise in mortgage rates in the third quarter of 2022. And that means the business entered 2023 with a lower order book than in recent years. So sales volumes will likely be lower through the coming year.
However, the directors are “confident” the medium- to long-term fundamentals of the business “remain highly attractive”. And I reckon the challenges caused by rising interest rates will subside as 2023 progresses. And that’s because I’m expecting the Bank of England to begin winning its fight against inflation.
Strong sales anticipated
I also think Associated British Foods looks attractive. The company has an interesting mix of operations. As the name suggests, it owns a diversified international food and ingredients business. But it also owns the value clothing retailer Primark.
The company delivered a strong trading update in January. But looking ahead, the directors said they expected “significant” growth in sales for the full year with lower operating profit and earnings.
But despite both Taylor Wimpey and Associated British Foods guiding earnings expectations lower, I’m inclined to look beyond the immediate challenges faced by each business. To me, valuations look reasonable now for many listed companies. And that’s a good reason for me to buy shares because I’m optimistic that trading conditions will improve in the years ahead.
However, I could be wrong and these businesses may face tougher times ahead. Indeed, all shares carry risks as well as positive potential. Nevertheless, If I had some spare cash to invest, I’d consider these three stocks right now.