With a lot of uncertainty still hanging over the UK economy as a result of the pandemic, it’s not the easiest time to be an investor in shares. Yet the markets can reward the brave. With schools back, we’re entering the final months of the year. These two contrarian shares are my UK shares to watch as a remarkable year heads towards its final three months.
Aviva becoming a UK share to watch
Once again, it seems to be all action at Aviva (LSE: AV) under yet another new boss. It has now decided to sell off its Singapore operations, something the old boss was unwilling to do. This has pleased investors. There could well be a further scaling down of international operations that could make the group leaner and more profitable and give it cash with which to reduce debt.
The new CEO has also put her money where her mouth is by buying up £1m worth of the shares. This is a decent token of faith and is reassuring for investors.
The pandemic has hit the shares hard, but there are reasons to think the share price could recover. New leadership is the most likely reason and Aviva is now a stronger business than it was a decade ago. Investors now could reap the rewards of the improvements that have been made under consecutive chief executives.
The struggling and undervalued banking giant
Shares in Lloyds Banking Group (LSE: LLOY) have been hit hard so far this year. The shares are down 60%.
But the share price has stabilised in recent weeks, despite ongoing concerns about a Covid-19 vaccine, the US presidential elections and US-China relations. This suggests to me that most sellers have already sold out and moved on. The most likely short-term boost could be from bad debts being less bad than expected. Lloyds has already set aside significant capital in anticipation of a weakening economy.
Good news on the dividend front could also be a catalyst. Given that the European Central Bank has given tentative approval for dividends to recommence before the end of the year, UK banks could be in a similar position soon. As the yield was one of Lloyds’ main attractions pre-pandemic, its return – even if at a lower level – would be very welcome.
Again, a change in leadership could also be a positive at Lloyds. The current CEO will have been replaced by this time next year at the latest. The chairman is also changing. This could give the bank a new strategy and the shares impetus, if investors like the change.
Of course, it’s not just about the coming months. These shares also have plenty of potential longer term. What I do think is that now provides a potentially attractive time to buy the shares cheaply ahead of any recovery.
