I believe buying UK shares is one of the best ways to try and build a big nest egg for retirement. Studies show the average yearly return for stock investing sits somewhere between 8% and 10%.
But it’s important to remember that UK share investing is rarely plain sailing. Economic shocks can cause prices to shake wildly as profits come under pressure. Internal and external company-specific problems can also damage eventual returns.
With some sound research it’s possible to discover plenty of stocks that could deliver big shareholder profits over the long term. Here are two I think could create strong shareholder returns over the next decade.
Investing in green stocks is a popular theme with UK share investors today. And there are a variety of ways stock pickers can do this. I think Greencoat UK Wind (LSE: UKW) is a great way to play the push towards green energy sources.
Firstly, the wind farm operator continues to build its estate to latch onto soaring demand for low-carbon energy. Indeed, it announced the acquisition of two Scottish farms for almost £100m just this week.
Secondly, wind turbines produce much more energy than solar panels. Wind is also much more cost-effective than solar. This could make this form of renewable energy the focus of government policy going forward.
I’m not suggesting things are all plain sailing for green energy companies however. For Greencoat UK Wind it faces huge infrastructure costs to link its remote wind farms to the power grid.
On top of this, wind power is a notoriously-unpredictable source of energy, meaning that profits generation isn’t as reliable as that of many other UK energy-producing shares. This, theoretically, could impact its ability to grow dividends each and every year.
A great UK leisure share
I also think 888 Holdings (LSE: 888) has the tools to thrive over the next decade. It stands to benefit from the steady transition from betting shops to online, thanks to its industry-leading platforms. The business also has a significant (and increasing) footprint in the fast-growing US marketplace. And it has a significant cash pile (above $140m as of June 2020) to keep expanding its operations through acquisitions.
There’s a couple of significant risks to 888 Holdings however. Restrictions slapped on the activities of gambling companies is an ever-present problem for them to deal with. Earlier this month, the UK Gambling Commission imposed new rules on online slots which include reducing spin speeds and requiring operators to clearly state a player’s total wins or losses.
Finally, 888 Holdings trades on a high forward price-to-earnings (P/E) ratio of 22 times. This could prompt a sharp share price reversal if trading conditions begin to sour.
That said, I still think the UK leisure share is an attractive investment for decent long-term returns. City forecasts can fall short of their target, of course. But, right now, broker estimates suggest the gambling giant can recover quickly from an 18% earnings fall in 2021. A 9% year-on-year increase is anticipated for 2022.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Greencoat UK Wind. 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.