Summer is often a quiet time in the stock market, with traders away for their holidays. So I am taking advantage of the quieter news flow to consider my portfolio and what UK shares to buy now.
With £5,000 to invest in UK shares, here are five I would buy now. And to reduce my risk through diversification, I would invest £1,000 in each.
All wrapped up
Investing in packaging company Mondi could be a good way for me to tap in to growing demand for paper and packaging. The increase in online shopping during the past couple of years has shown few signs of slowing down. Packaging materials look set to be in high demand for years to come. That is good news for the company, which operates packaging factories in a variety of countries.
A price-to-earnings ratio of 19 suggests a risk that the share price could look expensive if sales slow down. But given long-term trends in packaging demand, I would consider Mondi shares today for my portfolio.
Another UK share I would consider stashing in my portfolio for years or even decades to come is medical devices maker Smith & Nephew.
The delay of elective procedures during the pandemic has hurt sales and there is a risk that this could persist if we see a Covid resurgence, weakening sales this year too. But the company attracts me because it has well-developed markets, strong customer demand and pricing power thanks to its reputation for quality medical devices. I see that as the basis for long-term returns.
I continue to see value in the tobacco sector too. I consider British American Tobacco to be UK shares to buy now and would happily add more to my portfolio. The shares are 5% cheaper than they were a year ago. Meanwhile, the dividend has been increased again – as it has each year for over two decades. That means that BATS now offers a yield of 7.6%.
Tobacco shares come with risks though — declining cigarette consumption is a perennial threat to revenues and profits.
High street penny stocks
When thinking of penny stocks, the first name to come to mind isn’t typically Lloyds. But the high street banking giant continues to trade in pence rather than pounds.
That is despite lots of good news for the bank, including this week’s announcement of the end of restrictions on dividends it can pay. Lloyds has previously indicated that it plans to raise its dividend and has excess cash it could use to fund that. No dividend is ever assured, though, and one risk for the business is its heavy reliance on the UK economy. A lack of diversification means that any economic downturn in the UK could go badly for it.
Finally, over the past year, builder Galliford Try has added an impressive 45% to its share price. But I still include it among my list of UK shares to buy now. Not only does it have a profitable building business, it is also sitting on a cash pile which — when it last reported — exceeded its current market capitalisation. That suggests to me the shares remain undervalued. Unforeseen cost overruns are always a risk for construction companies, which can hurt profits, but I’d still buy.
Christopher Ruane owns shares in British American Tobacco and Lloyds Banking Group. The Motley Fool UK has recommended British American Tobacco, Lloyds Banking Group, and Smith & Nephew. 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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