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My 2 top stocks I’d buy for the upcoming bull market

Harshil Patel
·4-min read
A bull outlined against a field
A bull outlined against a field

The stock market has been weak over the past few months, possibly partly due to uncertainty surrounding the US election and further Covid-19 related lockdowns.

However, this weakness has presented a good opportunity to buy stocks, in my opinion. I reckon a bull market is coming. It might be difficult to see with so much doom and gloom in the news, but times of uncertainty can be great times to pick up top stocks of leading companies at cheaper prices.

There are many reasons for an upcoming bull market. Stock markets are forward-thinking and try to look six to nine months ahead. Next year, it’s possible that the world will be in a better place regarding Covid-19. Continued low interest rates, supportive government measures, and progress with vaccines could all be reasons to be positive for the stock market.

Top stocks in all shapes and sizes

One of my favourite stocks to buy for the upcoming bull market is Luceco (LSE: LUCE). This mid-sized company is a manufacturer and distributor of innovative wiring accessories, LED lighting, and portable power products. It’s not as well known as the large high street names, but sometimes smaller, lesser-known companies can be strong picks.

It recently released a better than expected trading update, highlighting strong demand from its online customers. Online sales were 25% higher than last year.

Despite social distancing measures in some of its markets, Luceco experienced strong demand from Europe in the third quarter. Sales were likely boosted by postponed demand following the Covid-19 lockdown in the second quarter.

In addition, the gross margin was better than expected due to more efficient production. Expanded margins, higher growth, and well-controlled costs led to an operating profit 60% higher than last year. I’d say this is impressive. Luceco is fast becoming one of my top stocks to buy this year.

In addition to decent growth numbers, it has some good financial metrics. With a return on capital of over 25% and a dividend yield of over 2%, I’d consider adding some shares to my Stocks and Shares ISA.

Publisher reaching new heights

Another stock I’d buy for an upcoming bull market is Reach (LSE: RCH). It was formerly known as Trinity Mirror and is a national and regional news publisher. There’s a big shift happening from physical newspapers to online media and Reach looks well-placed to capture this trend.

This mid-sized UK publisher has over 40m unique monthly views online across over 50 websites. In the UK, it’s the fifth-largest online property after Google, Facebook, Microsoft, and Amazon.

With so much content, I think it looks like Reach should be able to capture more customer data and increase digital advertising. By doing so, I reckon it should be able to increase operating margins.

It saw a strong recovery in the digital advertising market since the worst impacts of Covid-19 in April. Results for the first half of the year were “materially ahead of expectations”.

Not only does Reach have growth potential, but it also looks incredibly cheap to me. It has a price-to-earnings ratio of just four times. In addition, it provides a dividend yield of 5%. This combination seems like a no-brainer to me and I’d consider adding it to my top stocks watchlist.

The post My 2 top stocks I’d buy for the upcoming bull market appeared first on The Motley Fool UK.

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Harshil Patel owns shares in Luceco, Amazon, Facebook, and Microsoft. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. The Motley Fool UK owns shares of and has recommended Alphabet (A shares), Amazon, Facebook, and Microsoft and recommends the following options: long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, short January 2022 $1940 calls on Amazon, and long January 2022 $1920 calls on Amazon. 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.

Motley Fool UK 2020