The UK economy is expected to regain its pre-Covid-19 peak in the third quarter of 2022, according to the Ernst & Young ITEM Club forecast. This is better than the 2023 and 2024 dates as predicted in earlier forecasts.
Best shares to buy now #1
BHP Group (LSE: BHP) is currently trading at a price to earnings (P/E) ratio of 13.10. The stock rose 21% in the past year. It has given good returns to shareholders, as the stock has doubled its price over the past five years. The dividend yield is 3.30%. The company has some high-quality assets, which have helped BHP to keep the extraction costs low and remain profitable.
It recently released its operational review for the first half of the 2021 financial year. In the words of BHP CEO, Mike Henry, “BHP delivered strong safety and operational performance in the first half of 2021 financial year, including record production at Western Australia Iron Ore and concentrator throughput at Escondida.” Full-year iron ore production guidance has been increased due to the re-starting of the Samarco operations in Brazil.
However, the commodities sector is highly volatile and the share prices are usually correlated with the commodity prices. There are concerns that slower growth in China and the preference for renewable energy might take some shine from the commodity prices.
Best shares to buy now #2
BP (LSE: BP) shares fell 41% in the past year. The drop in business activity due to Covid-19 has led to the sell-off in the oil and gas sector. However, there are signs of optimism as the stock rose 46% in the past three months.
Recently, a number of analysts are positive on the prospects of BP; notably, Barclays has revised its target price from 400p to 475p, which suggests an upside of 70% to the current stock price. The company slashed its dividend in August 2020 due to the fall in oil prices and also due to its plan to invest in renewable energy projects.
Covid-19 has reduced the demand for oil and, in the longer term, the move to electric vehicles will reduce the dependence on oil. However, I feel that a fundamentally strong company like BP is able to sustain itself better than its smaller competitors.
Best shares to buy now #3
Owner of British Airways and Iberia, IAG (LSE: IAG) shares are currently trading at a P/E ratio of 0.93. The stock fell 65% in the past year. The Covid-19 had brought the airline industry to a halt and this is very much obvious in the company’s stock price. However, I believe that the airline industry will bounce back strongly and a company like IAG should outperform the market.
It also revised the terms of its deal to buy a Spanish airline Air Europa, through its subsidiary, Iberia. Under the new deal, which is 50% lower than the original deal, IAG has agreed to pay $607 million and the payment will be deferred until the sixth year anniversary of the acquisition’s completion.
The airline stocks are very volatile and Covid-19 will have a negative impact on the company’s operations this year. However, in my opinion the merits outweigh the risks by a wide margin.
