The US economy continues to show strong growth. Numbers for 2021 released earlier this week showed that it grew at a strong 5.7% rate, with 6.9% annual growth in the final quarter of the year alone. It did have the advantage of a low base effect — the economy had shrunk in 2020 when the pandemic was at its height. But there is more reason to believe that the US is indeed in fine form. The International Monetary Fund’s latest forecasts for 2022 put its growth at 4%, which is among the strongest growth rates for advanced economies.
Ashtead could rise further…
I think this bodes well for UK stocks that count the US among their biggest markets. Two of them are the FTSE 100 companies Ashtead and CRH. Ashtead, which provides industrial equipment on rent, gets some 80% of its revenues from the US. Crucially, the company is focused on the construction industry. Being cyclical, the industry could get a boost as growth stays strong. US President Biden’s Build Back Better bill is still hanging in the balance, but if it goes through, the stock could get an even bigger boost.
The only catch to the stock is how steeply it has run up since the pandemic. It was a robust stock even earlier, but its rise has been particularly sharp in the past couple of years. This is despite some correction in recent months. Going by its positive earnings forecasts though, I think it could rise further. I think it is a good time to buy it for my portfolio.
This FTSE 100 UK stock could too
CRH has a similar story to Ashtead. More than half the construction biggie’s revenues stem from the US market. I bought it a few months ago, and until a few days ago, things were going in the right direction. But it has dipped in the past couple of weeks, which might be a red flag. It also makes me wonder though if this is the right time to add to my holdings of the stock. I do like its price-to-earnings ratio of 25 times. It is higher than the FTSE 100 average of 18 times, but then its prospects look better to me than that of the average stock too, so going by that it is still fairly reasonable. Especially now, after looking at the US economy’s latest numbers. It also expects profits to increase, which gives me even more hope.
…as could Cineworld shares
Another US-focused UK stock I like, and one that is quite controversial right now, is Cineworld. The company was UK market driven, before its ill-fated acquisition of Regal Cinemas. Now, however, the US is its biggest market, and a booming economy is great news for consumer discretionary businesses like cinemas. There is no denying that the FTSE 250 penny stock has a mountain of debt to pay off. I believe that further moderation in the pandemic, the release of blockbuster movies, and consumers’ ability to spend in a high growth environment will hold it in good stead. I have long been bullish on the stock, and now I am even more so.
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Manika Premsingh owns CRH and Cineworld Group. 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.
