Have £1,000 to invest? I think this is one of the best shares to buy now

This is one of my best shares to buy now because of its share price growth so far and prospects ahead. Are there any red flags here, though?

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For my long-term investments, I like to look out for big emerging themes and then drill down to individual stocks that can benefit from them. One such theme is the accelerated rise of the online economy. E-shopping has sharply risen in the pandemic. As a result, I think some of the best shares to buy now can be found under this umbrella. 

One of the best shares to buy now

One such stock is a FTSE 250 real estate investment trust that specialises in warehouses, Segro (LSE: SGRO). It might not be an e-retailer like Ocado or a bricks-and-mortar retailer that has seen sharp increases in online sales like Next, but it is part of a supporting industry to online shopping. 

It’s most comparable to paper and packaging providers like Mondi and Smurfit Kappa. Even though the sector is economy-sensitive at other times, the online shopping boom has been positive for them in 2020. The same goes for warehousers like Segro.

Financially healthy 

In its 2020 results released yesterday, it showed an 11% increase in profit before tax and a 4% increase in earnings per share. An increase in both rental income and low vacancy rates has contributed to this. 

It’s little surprise then that Segro was one of the biggest FTSE 250 gainers, adding to its consistent share price climb. At almost £10 per share, I would be able to buy 100 shares with £1,000 now, a nice round figure.

Favourable share price trends

Going by its previous share price patterns, I think in another five years my capital would have doubled to £2,000. And going by the accelerated increase in its operations, I reckon this can happen even faster.

This is particularly so because its price-to-earnings (P/E) ratio is at 16.2 times, which places it favourably against other high-performing FTSE shares.

Segro’s a dividend payer

Further, I would earn a dividend too. Now, its dividend isn’t a highlight. In fact, at 2.2% I can even omit it entirely from this piece. But I think what it lacks in amount, it makes up for in the potential for stability. 

Here’s why. If I think that SGRO’s prospects look good, then there’s no reason that its earnings wouldn’t be stable to growing. If that is the case, then dividends should be stable at the very least too. Small amounts can add up over time.

The risk of over-optimism

The only aspect I’m wary of is over-optimism. And that goes as much for me as anyone else. When we are bullish, it’s easy to miss the red flags. And there is increasing consensus that the e-shopping boom will continue. We’ll know more as the lockdowns end how things are really faring.

Conclusion

There might be too much exuberance right now, but it is a financially healthy company in a growing sector. These facts are unlikely to change in a hurry. My returns of £1,000 invested maybe slower, but they will come if I’m patient. So, Segro stays one of the best shares for me to buy. 

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 assessed. Consider taking independent financial advice.

Manika Premsingh owns shares of Ocado Group. The Motley Fool UK owns shares of Next. 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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