2 of the best UK shares to buy this February

Looking for the best UK shares right now? Harshil Patel considers two possible choices he’s thinking about.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

University graduate student diploma piggy bank

Image source: Getty Images

Some of the best UK shares I’m considering this February are those that performed well in 2020 but whose share prices have drifted lower in January. In addition, I am only looking for good quality companies that show earnings growth, solid return metrics, and strong balance sheets.

Short-term lower prices could be an opportunity to buy some of the best UK shares at a discount. Share prices can move around for so many different reasons, and sometimes, fundamentally strong companies can be available to buy on sale.

Of course I could be wrong and it could be the start of a deeper correction. But by focusing on good quality companies, that are performing well and run by competent management, I feel comfortable taking that risk.

Best UK shares on sale

One company I’m looking at this February is Flutter Entertainment (LSE: FLTR). If the name doesn’t sound familiar, it used to be called Paddy Power Betfair. This £25bn FTSE 100 online betting company has grown significantly over the past decade. It also owns FanDuel, PokerStars, and FOX Bet in the US.

The UK has relatively relaxed online gambling laws, in my opinion. In contrast, in the US, several states are only just opening up their markets to this burgeoning sector. This is where I think the opportunity is for Flutter Entertainment (and others in the industry). The UK gambling sector offers some of the best UK shares right now, in my opinion.

Several US states recently legalised online sports betting and additional states are moving towards legislation. The pandemic also accelerated demand for online betting options and I reckon this trend could continue.

Flutter Entertainment’s share price increased by 64% last year, but has pulled back and drifted lower over the past month. I can’t see any particular major reason for this, so I look at it as a possible buying opportunity for my Stocks and Shares ISA.

With a price-to-earnings ratio (P/E ratio) of 40, Flutter shares might look expensive to some. But with revenues growing at 25% per year, I will take a further look.

Volatile markets

Many new investors started investing in stocks and shares in 2020. Some reasons for this include volatile markets, and millions of people being stuck at home. There was also a greater desire to capitalise on rapidly rising share prices in several popular technology stocks.

New investors and volatile markets helped online trading services provider IG Group (LSE: IGG). It recently reported a “record” performance in its first half, seeing profit more than double on a year ago. Trading revenue surged 67% and active clients rose 55% in the six months to 30 November. In addition, IG Group unveiled its $1bn acquisition of tastytrade, a US-based online brokerage. This could help further diversify the business into higher growth US markets.

The IG group share price rose by 24% in 2020, but has retreated by nearly 10% over the past month. I think this could be an opportunity for me to buy one of the best UK shares around.

I consider IG group to have high-quality metrics. For instance, it has a return on capital of nearly 40%, an operating margin of over 50%, and an undemanding P/E ratio of under 13. I could even add this to my income portfolio as it offers a near 6% dividend yield.

I believe the downsides include a possible normalisation in financial market volatility, or a stabilisation in the macro environment.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

Harshil Patel owns shares of IG Group. The Motley Fool UK owns shares of Flutter Entertainment. 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.

More on Investing Articles

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

With a spare £500 I’d buy these UK shares

A financial services giant, a FTSE 250 distributor, a FTSE 100 tech stock, and a gold miner are on the…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

Should I buy this defensive FTSE 100 stock for growth and returns?

This Fool takes a closer look at a FTSE 100 stock to see if it could boost his holdings via…

Read more »

Young female analyst working at her desk in the office
Investing Articles

I robbed Mr Market of this cheap FTSE stock!

This FTSE 250 stock has crashed by almost 30% in six months. But I recently bought into this battered business…

Read more »

Mature people enjoying time together during road trip
Investing Articles

3 reasons I’m backing NIO shares to soar!

NIO shares have bounced up and down this year. But where will the share price go next? My bet is…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Up 300%, is the Hurricane Energy share price an opportunity too good to miss?

This Fool looks at why the Hurricane Energy share price has soared in the past 12 months. Should he buy…

Read more »

Middle-aged white man pulling an aggrieved face while looking at a screen
Investing Articles

The BT share price crashes 20% in a month. Buy now?

The BT share price has crashed by almost a fifth since coming close to £2 on 12 July. After this…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

How I’d invest £1,000 in growth shares today to target £5,000 in a decade

Our writer reckons he could do well by choosing the right growth shares today and holding them in his portfolio…

Read more »

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Investing Articles

How passive income from stocks can speed up early retirement

By investing patiently over the years, buying quality shares has given me enough passive income to retire 10 or even…

Read more »