I believe the best UK shares to buy right now are those businesses that may benefit from the economic recovery over the next few years. And with that in mind, here are five companies I’ve been looking into recently with the view of adding them to my portfolio.
UK shares
The easiest way to invest in the economic recovery, in my opinion, is to buy companies such as Severfield and Balfour Beatty. The former steel manufacturer and latter construction business should benefit if the construction industry returns to growth over the next few years. The businesses could also benefit from the government’s infrastructure spending plans, which may lift demand across the construction industry.
That said, construction and engineering are two notoriously volatile and low-margin industries. So, these businesses aren’t without their risks. If there’s another economic downturn, they could suffer more than most. Still, despite these risks, I’d buy these UK shares for my portfolio today.
Financial returns
Alongside construction, I think one of the best sectors to invest in to play the economic recovery is financial services. On that basis, I’d buy mid-cap lender Secure Trust and and challenger bank Virgin Money UK.
Throughout the pandemic, investors have avoided financial companies because these businesses have reported growing losses. However, with the outlook for the economy improving, these losses should begin to recede. This should help these UK shares stage a recovery over the next few years.
The economic recovery may also lead to improving consumer confidence, which may increase the demand for borrowing. That would be positive for credit providers such as Secure Trust and Virgin.
But like all investments, these companies do have their risks. Ultra-low interest rates have depressed profit margins, and it doesn’t look as if rates are going to be pushed higher anytime soon. Further, financial institutions tend to have complex balance sheets, which can make them challenging to understand. These challenges aside, I’d buy Secure Trust and Virgin for a portfolio of UK shares today.
Shares to buy right now
The final company on my list of UK shares to buy right now is Volex. This supplier of power cords and cable assembly solutions had a fantastic 2020. It reported profit growth of 15% for the year thanks, in part, to booming demand for electronics products.
As the demand for electronic equipment continues to increase, City analysts are expecting the group to report further growth in 2021. A net increase in income of 80% is being forecast.
This is just a forecast at this stage, and there’s no guarantee the company will hit this target. Indeed, the group has disappointed investors before. After losing a significant contract in the middle of the last decade, it reported several years of losses, and the share price plunged. There’s no guarantee this won’t happen again.
Nevertheless, I believe City growth forecasts show Volex’s potential. That’s why I’d buy the stock from my portfolio of UK shares today.
