2 UK stocks to buy for the next bull market

UK stocks are more volatile than usual at the moment. Both sides in FTSE 100 with FTSE 250 lower than a week ago.

But such a period in the stock market does not last forever. And I think now is a good time to think about stocks that will come into their own when the market turns.

Forterra

Earlier this week, the Office for Budget Responsibility predicted that UK house prices would fall 10% from their highs by the end of 2022. In the short term, this will be a problem for brick manufacturers. Forterra (LSE: FORT).

Falling house prices is probably the biggest reason why stocks have dropped 25% over the last six months. The business is doing well in 2022, but the market seems to be concerned that this will continue for a while.

I think there is some justification for that thought. The brick industry is cyclical and making projections based on company performance during strong periods is clearly risky.

However, the stock has some significant tailwinds that could prove durable. Although demand for bricks can rise and fall, the UK market is constantly undersupplied.

That’s why I want to buy the stock at the current price. It’s not as simple as looking at the current low price-to-earnings (P/E) ratio and the dividend yield approaching 8%, but I think the stock is cheap.

diploma

There are other stocks that I really like right now. Despite (or maybe because of) some impressive earnings in 2022, the stock in diploma (LSE: DPLM) is currently trading at a P/E ratio of around 33. That’s quite high and I think it represents the biggest risk with the stock.

The company’s earnings will need to grow significantly to justify the price and the market seems unlikely to do so. That’s why the price has fallen again in the last 12 months.

Diploma is a distributor of industrial components, which makes business like any other cycle. But I think there are some reasons to think that the outlook is bright now.

First, the company focuses on components that are important for manufacturing, but also cheap. As a result, it is usually paid as an ongoing expense, rather than a capital investment.

Second, the macroeconomic outlook is improving, with current forecasts suggesting that the UK can avoid recession in the future. This is also positive for Diploma business.

No one told the stock price, which kept falling. I think this could be a great stock to have in the next bull market and beyond, so I’m looking to add to my investment here and there.

Buy shares

In the short term, Forterra and Diploma may be volatile investments. It’s only natural that both stocks can go down in a volatile and uncertain stock market.

But in the long run I hope both companies will do well. That’s why my plan when investing for the next bull market is to make sure that I only invest money that I don’t need for a while and to be patient.