How I’d invest a £20,000 Stocks and Shares ISA in February

If I had £20,000 squirrelled away in the Stocks and Shares ISA in February, I would invest in certain neglected areas in the current market. While it’s not guaranteed, I think a narrow focus like this opens up the potential for higher returns than investing with the crowd.

Great technology

Big tech stocks drove the last decade’s bull market in the US. However, all good things must come to an end at some point. And that point was last year, after the tech giant’s stock took the hammer.

I would say this is too late because most of the valuations there have reached a ridiculous level. As the bull market nears its peak, it’s like a speculative frenzy breaks out. Everything reminded me of the farm animals taking in one last scoff as the farmer approaches to remove the trough. This often happens at the end of a bull market cycle.

However, after the recent correction, I think some potential buying opportunities have opened up for long-term investors.

Of course, the drop in stock prices doesn’t tell investors everything. If business really goes down, it will probably go down again.

But I don’t think so Microsoft and Apple they go down in everything. They have a balance sheet like a fortress and I expect the stock to recover.

UK property market

Rising interest rates have sent UK house prices falling for the first time in years. This has been reflected in the decrease in the stock of housebuilders.

But Britain faces a shortage of affordable housing. The government has committed to building 300,000 new homes a year by the mid-2020s. This should remain in demand for years to come, despite economic uncertainty.

The two stocks I recommend are FTSE 100 house builder persimmon and FTSE 250 middle cover Redrow. The shares are down 48% and 26% in a year. Both are on my watch list.

Disconnected

Ouch…As of this writing, our stock is down over 80% from when I wrote you last year. However, by almost any measure, the company’s Amazon.com is in a stronger position than it has been in the past.

Jeff Bezos, 2000 annual letter to Amazon shareholders

Why am I quoting an Amazon shareholder letter from over two decades ago? It is not to highlight that the shares are up over 100 times from the point. Or it is unlikely that investors will find the magical 100-baggers (shares that return £100 for every £1 invested).

No, to highlight that it is often more important to focus on the operational progress of the business than the stock price. Sometimes these two things can become disconnected from each other.

This is what Bezos pointed out when he said “by almost any measure“, Amazon is a stronger business than a year ago. But the stock price will tell the opposite story.

I think there is another opportunity now, with the stock having lost between 50% and 80% of its value over the past 18 months. They also need more to fall in the coming months. But long term, some will look like a bargain at current prices.