The stock market has been doing quite well in December to date. This is how I plan to invest in shares to benefit from any further stock market rally this December, which is often a good month for investing. This is due to the so-called Santa Rally phenomenon, when markets often go up at the very end of the calendar year — at least in more years than not.
How to invest in shares: my plan
I plan to keep investing in shares because for me it’s a good way to grow wealth, and tax-efficient if done inside a Stocks & Shares ISA. The impact of compounding, where dividends are reinvested to create more income that builds year after year, beats working well beyond retirement age. At least in my view and in my circumstances.
I already have a portfolio of UK shares with a smattering of funds and investment trusts. My plan is to keep adding high quality, usually dividend paying shares in 2022 and beyond, and to run my winners. This means not selling shares that do well too early. After a tough couple of months, I hope the Santa Rally will happen this year.
A top share to benefit from a Santa Rally
If the Santa Rally really does take off this week, I hope and expect my shares in Somero Enterprises (LSE: SOM) to do well. Somero is quite a niche company. It produces laser-guided equipment used in construction. In the US market, the group has done well and it is expanding globally, although the company has struggled to break into the Chinese market.
Construction is also a cyclical industry, which could in a downturn really hit Somero’s revenue and profits. So that’s the concerns out the way.
Why could Somero be a winner?
The Somero shares had a recent price blip, which I think is nothing more than some limpness in the overall market. That’s tempting me to buy more. Why? Because I back the shares to do well and the company provides both income and growth. That’s a great combination, in my opinion. The shares are also pretty well valued.
Take growth first. Between 2015 and 2020, revenue went from £70.2m to £88.6m. From an income perspective, the dividend yield is about 4.4%, which is high, especially for a smaller company. Then on top of that growth and income combination, the shares trade on a forward P/E of 11, so don’t seem expensive at all.
With e-commerce driving enormous demand for warehousing, which Somero machines are used to help build, and US president Joe Biden committing $2trn to America’s infrastructure, the group has significant factors that could help it grow further. That’s another reason I like the shares.
I hope this article has been useful in outlining how I intend to invest in shares and why Somero Enterprises particularly.
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Andy Ross owns shares in Somero Enterprises, Inc. The Motley Fool UK has recommended Somero Enterprises, Inc. 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.
