1 of the best UK shares to buy for the new bull market

Looking for UK shares to buy for the economic upturn? Here’s a British stock I think could soar in value during a new bull market.

| 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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

It’s almost a year since since UK share markets fell through the floor. But investor confidence is yet to fully recover from the stock market crash that took the FTSE 100 to multi-year lows. In fact, the Footsie is still trading at an 11% discount to those pre-crash levels below 6,600 points.

Major UK share markets have failed to replicate the strong rebounds of other major international indices for various reasons. Firstly, the economic recovery in Britain threatens to be weaker than those of other nations due to the twin pressures of Covid-19 and Brexit. The services-heavy nature of the British economy also leaves it in huge danger of languishing for longer should coronavirus lockdowns drag well into 2021 and possibly beyond.

UK shares set to rebound?

There’s also the fact that, unlike the FTSE 100 for example, indices like the Nasdaq and the Nikkei are packed with tech companies. These sorts of companies have enjoyed a strong profits uplift from the rise of e-commerce, remote working and video streaming, among other causes. Amazon and Netflix are just a couple of US shares that have enjoyed a considerable profits bump over the past year.

By contrast, the FTSE 100 has a strong weighting to banks and oil producers. Cyclical UK shares like these include Lloyds and BP that have been hit hard by Covid-19. And they stand to suffer further if the economic recovery fails to ignite.

But could now be the time to buy UK shares? There are a lot of quality companies I think remain pretty cheap following the 2020 stock market crash. And signs of falling coronavirus cases across much of the globe suggest that we could be on the cusp of a robust economic upturn.

Expensive but exceptional?

Recent studies suggest that investing in the recruitment sector could be a good way to play the new bull market. A survey just released from the Chartered Institute of Personnel and Development showed that more than half (56%) of UK firms plan to take on more staff in the next few months. This is the best result for around a year.

The data suggest that now could be a great time to invest in UK shares like Hays (LSE: HAS). This particular recruiter actually saw net fees and profits accelerating during the final calendar quarter of 2020. And so the firm declared plans to start paying ordinary dividends again from the summer. It wants to dole out a £150m special dividend too. The scramble over the past year to save cash is clearly receding.

City analysts think that Hays’ annual earnings will slip 61% this fiscal year (to June 2021). But they reckon the bottom line will rebound 184% in financial 2022. A word of warning, though: today the company trades on a sky-high forward price-to-earnings (P/E) ratio of 77 times. I think this could cause this UK share to plummet in price if the fight against Covid-19 takes a nasty turn and the anticipated economic recovery fails to materialise.

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.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Amazon and Netflix. The Motley Fool UK has recommended Lloyds Banking Group and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. 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

Investing Articles

Here’s how I’d aim for a ton of passive income from £20k in an ISA

To get the best passive income from an ISA, I think we need to balance risk with the potential rewards.…

Read more »

Abstract bull climbing indicators on stock chart
Investing Articles

2 FTSE 100 stocks I’d buy as the blue-chip index hits record highs

This Fool takes a look at a pair of quality FTSE 100 stocks that appear well-positioned for future gains, despite…

Read more »

Satellite on planet background
Small-Cap Shares

Here’s why AIM stock Filtronic is up 44% today

The share price of AIM stock Filtronic has surged on the back of some big news in relation to its…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

At a record high, there can still be bargain FTSE 100 shares to buy!

The FTSE 100 closed at a new all-time high this week. Our writer explains why there might still be bargain…

Read more »

Asian man looking concerned while studying paperwork at his desk in an office
Investing Articles

After profits plunge 28%, should investors consider buying Lloyds shares?

Lloyds has seen its shares wobble following the release of its latest results. But is this a chance for investors…

Read more »

Abstract bull climbing indicators on stock chart
Investing Articles

Something’s changed in a good way for Reckitt in Q1, and the share price may be about to take off

With the Reckitt share price near 4,475p, is this a no-brainer stock? This long-time Fool takes a closer look at…

Read more »

Investor looking at stock graph on a tablet with their finger hovering over the Buy button
Investing Articles

This new boost in assets might just get the abrdn share price moving again

The abrdn share price has lost half its value in the past five years. But with investor confidence returning, are…

Read more »

Young Black man sat in front of laptop while wearing headphones
Investing Articles

As revenues rise 8%, is the Croda International share price set to bounce back?

The latest update from Croda International indicates that sales are starting to recover from the end of 2023, so is…

Read more »