I believe some of the best UK shares to buy now are recovery plays. These businesses could benefit as the UK economy opens up over the next few months and recovers to pre-pandemic levels over the next few years.
With that in mind, here are two companies I’ve recently been reviewing with the view of adding them to my portfolio.
The first stock on my list is the public transport company FirstGroup (LSE: FGP). This organisation has suffered from the pandemic more than most. As travellers have been advised to avoid public transport and avoid going to work, revenues across the business have plunged.
As a result, like many other UK shares, the firm reported a substantial loss of £327m in 2020. Further losses are expected in 2021. However, by 2022, the company and City analysts expect the group to return to profit. These are just forecasts at this stage and there’s no guarantee the corporation will hit these projections. It could earn significantly more or less than the £81m net profit analysts have pencilled in for 2022.
Still, I think these projections show the company’s potential. The main challenges the group faces going forward are related to the pandemic. If restrictions continue for longer than expected, FirstGroup’s revenues will remain under pressure. There’s also no telling how quickly travellers will return to public transport.
I think these are short-term headwinds. Over the long run, the government wants to encourage more consumers to use public transport and reduce reliance on individual vehicles. Public transport operators like FirstGroup will be a vital pillar of this strategy.
That’s the main reason I’m willing to look past the company’s short-term headwinds and buy this stock for my portfolio of UK shares.
Shares to buy now
The second business on my list of the best UK shares to buy right now is another recovery play, N Brown (LSE: BWNG).
Shares in this fashion retailer are dealing around 50% below their pre-pandemic high. While the business has faced challenges over the past 12 months, I think this ignores its long-term potential. Indeed, the now-digitally-focused retailer could turn a net profit of as much as £37m in 2022, according to current projections. That’s a big turnaround from the loss of £58m reported for 2019.
Nevertheless, these are just projections at this stage, and there’s no guarantee the firm will hit this target. Clothing retail is an incredibly competitive industry, and a company’s fortunes can change almost overnight. Just because N Brown appears to be successful today doesn’t mean consumers will stick with the business for the next two years. This is the biggest challenge the group faces right now.
By focusing on its core plus-size market, I think the company has an advantage over its competitors. That’s why I’m willing to look past the risks the business faces and buy the stock for my portfolio for the long term.
Put simply, as a cheap way to play the UK’s economic recovery, this could be one of the best UK shares to buy now.
Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.
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Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.