Thanks to the stock market crash, plenty of top UK shares are now trading at dirt-cheap valuations. I have decided to boil the FTSE 100 down to my favourite five. I would buy them today, with the aim of holding for the long term.
This is a personal list of top UK shares, and does not aim to be authoritative. Everybody has their own prejudices and views, with shares as with everything else. These are mine.
Insurer Legal & General Group (LSE: LGEN) been one of my top UK share picks for years. Its asset management arm saw the opportunity in passive investment funds at an early stage, and has reaped the benefit ever since.
I love these top UK shares
The stock market crash has handed L&G lovers a terrific buying opportunity. It now trades almost a third lower than a year ago (and it looked cheap then). Impressively, management has stood by the dividend, which is underpinned by a £7.3bn capital surplus and a £3.5bn credit default reserve. First-half revenues fell by three-quarters as low interest rates and the crash hit the value of its investments, but I think it looks tempting at just 6.2 times earnings.
The housebuilding sector is full of top UK shares, because the market is effectively underpinned by the government, through schemes such as Help to Buy. Further support could be on the way, as Ministers look to help first-time buyers get on the property ladder.
I’m recommending the biggest housebuilder of all, Barratt Developments (LSE: BDEV). It recently reported strong demand from July to October, with a 24% jump in home completions as pent-up demand was unleashed. House prices could crash once the stamp duty holiday draws to a close, at the same time as unemployment peaks. If you don’t want to buy at today’s valuation of 13.8 times earnings, you could put it on your watchlist for the next correction.
Spirits giant Diageo (LSE: DGE) has been on my list of top UK shares for years, and the pandemic hasn’t changed that. Today’s valuation of 24 times earnings looks expensive, but this stock is always expensive. You could pick up the Diageo share price for less if shares crash again, but its reliable revenue stream means it rarely falls by much.
My FTSE 100 favourites
There was good news for healthcare giant AstraZeneca (LSE: AZN) today after the EU approved its COPD treatment Trixeo Aerosphere. The FTSE 100 group has worked hard on replenishing its drugs pipeline over the past five years, and its share price has doubled in that time. That makes it expensive, trading at 25.9 times earnings. However, this top UK shares offers fast-growing earnings and a solid 2.4% yield.
If you prefer a cheaper opportunity, I would recommend diversified mining giant Rio Tinto (LSE: RIO) which currently trades at just 9.4 times earnings. Rio Tinto has a whopping 6.4% dividend yield, covered 1.7 times by earnings. It has benefited as the Chinese economy has got back on track faster than the West, and should enjoy a further boost when we finally beat the pandemic too. Another top UK share worth buying today, I think.
