Three weeks to ISA deadline day. Two shares I’d buy now

Hand holding pound notes

The deadline for adding money into this year’s ISA is fast approaching. After midnight on April 5, you’ll no longer be able to use up this year’s £20,000 allowance and it can’t be rolled over to next year. Time is critical! If you want to add money to invest this year, now is the time to do it and these are two shares I’d invest in within a Stock and Shares ISA.

Digging for growth

Last time I looked at equipment rental company Ashtead (LSE: AHT) I was very impressed by the company’s growth, rewards to shareholders, investment in developing the business and the valuation for shareholders. After a general market slump at the end of 2018, the shares now offer an even better buying point for investors in my opinion.

Third quarter results released this month showed a slight slowdown in the rate of growth, but on the positive side, underlying rental revenues rose 19% in the quarter to £1bn, with operating profits up 21% to £297m.

The US, by far Ashtead’s biggest market, saw revenue rise 21.9% in the first nine months of the year to £2.9bn, while the smaller Sunbelt Canada business increased revenues by 57% to £150m thanks to two large acquisitions. In the UK, A-Plant delivered a more modest 1.8% revenue growth to £360.4m. Operating profits across the three divisions were £928.2m, £27.7m and £54.7m respectively.

I think it’s good to see that the business continues to invest in growth, it should benefit investors in the future and capital expenditure in the first nine months of the year rose 49% to £1.1bn (net of money from the sale of older equipment). 

Forging its own path

Back in November one of my Foolish colleagues said he was a buyer of Direct Line (LSE: DLG) shares because of the combination of a history of high returns, good cash generation and a generous dividend yield – at the time it had a forecast yield of 8.7%.

Looking at the shares now, I’m inclined to agree with this analysis which is why I’d be tempted to add it to my ISA this month. The prospective yield is 7.9% for next year.

Full-year results identified that Direct Line is a business in transition. The picture wasn’t that rosy and operating profits of £601.7m were 6.4% lower in 2018 than in the previous year because an increase in own brand insurance policies failed to balance the loss of several large white label agreements. But the expectation is that its strategy will pay dividends in the future. 

With the company moving further into developing its own brands, there’s significant potential for higher margins through paying less commission, and for more loyal customers who go straight to Direct Line, indicating they are less inclined to use price comparison sites.

In a tough industry being made more competitive by easy to use price comparison websites (some of which are also listed on the London stock market) Direct Line does tend to stand out and that yield is very tempting.

Capital Gains

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Andy Ross has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

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