Growth investing can be a great way to build wealth in the long term. However, it can also be perilous, which is why I think investors should have a diversified portfolio of UK shares.
With that in mind, here are five UK shares I would buy today for a diversified portfolio of growth investments.
UK shares to buy
Data and data analysis is a booming business. That’s why the first two companies on my list are GlobalData and YouGov.
These two companies provide similar (but not identical) services for the information technology sector. They are both projected to report explosive growth over the next 12 months.
Analysts have pencilled in earnings growth of 64% for GlobalData and 54% for YouGov. These are just projections at this stage and should not be relied upon for investment decisions.
There are two primary challenges these companies face — competition from larger businesses and a potential data breach. The former could cause these organisations to lose market share, while the latter could significantly damage their reputation.
Still, I would buy both stocks as part of a diversified portfolio of UK shares to invest in the global data boom.
Market recovery
We’ve seen plenty of data suggesting the UK economy is starting to recover from last year’s setback. One way to play this trend, in my opinion, is to buy recovery plays, which may benefit from an improvement in economic activity over the next few months and years.
Norcros and Churchill China are two of my favourite options for this theme.
Norcros manufactures and sells home improvement products, and the company has benefited from the improving state of the housing market over the past six months. Its latest update reported that revenues in the UK between the beginning of February and the end of September last year increased around 15% year-on-year. I think this trend could continue as the UK economy recovers to full capacity.
Churchill, which supplies hospitality businesses worldwide, is expected to report a near 95% decline in earnings for 2020. However, the company is expecting a significant improvement in trading for 2021. Based on what we’ve seen in other markets around the world that have already started to open up, I think the business is right. Consumers appear to be happy to splurge after spending 12 months under restrictions.
Of course, the most significant risks these two companies face is another economic downturn. This could setback their recoveries, and there’s no guarantee either business would be able to survive another year of disruption. If the pandemic drags on into 2022, and there’s no economic recovery, Norcross and Churchill may struggle.
Defensive investment
The final company I’d buy as part of a diversified basket of UK shares is Hikma.
This global pharma business produces generic medications. While this may not be the fastest-growing market in the world, it’s not going to go away. As the world’s population continues to expand, I think the demand for drugs will only grow. That’s why I’d buy Hikma today.
The main risks the company faces are lawsuits from competitors, as well as regulatory controls. If the business falls foul of regulators, it could be forced to stop selling treatments, devastating its business model.
