As the economy starts to move on from the coronavirus pandemic, I’ve been looking for UK shares to buy for my portfolio.
Here are five companies I would buy with £5,000 today.
UK shares I’d buy
Rising stock markets around the world are producing bumper profits for asset managers. With that in mind, I would buy wealth manager Brewin Dolphin.
According to the company’s latest trading update, total funds under management increased by 10.5% during its half-year ended March 2021. This coupled with increased trading revenues, helped the business report a 44% increase in statutory profit before tax.
Of course, Brewin is just as exposed to falling markets. A sudden stock market decline could hit trading revenues and asset management fees. This is the most considerable risk the group faces right now.
I would also buy soft drinks bottler Coca-Cola HBC. Based on current estimates, this stock is trading at a forward price-to-earnings (P/E) multiple of 20.8. I think that looks cheap considering the business bottles one of the most popular beverages in the world. The stock also supports a dividend yield of 2.3%.
The biggest threat to the company’s existence is the risk that it may lose the rights to bottle Coca-Cola. However, despite this risk, I would buy the stock for my portfolio of UK shares today.
Dechra Pharmaceuticals develops and produces pharmaceutical products for animals. I think this is an incredibly defensive growth sector. Indeed, Dechra’s pre-tax profit has risen by more than 100% over the past five years. Moreover, as the global population of animals continues to increase, I think the demand for its products and services will continue to expand.
However, this stock might not be suitable for all investors. It is currently changing hands at a forward P/E of 38.1, which looks expensive to me and does not leave much room for error. If growth disappoints, the stock could drop in value substantially.
Recovery play
DFS looks set to reap the benefits of the UK housing boom. That’s why I would buy the stock.
According to its latest trading update, revenues for the 26 weeks to 29 December rose 17% to £572.6m. As a result, pre-tax profits jumped from £15.9m to £72.1m. I think it’s unlikely this kind of growth will continue indefinitely, but with profits surging, DFS should have plenty of cash to invest in the business for the future.
That said, if profits drop suddenly in a housing crash, DFS could struggle to return to growth. It’s also facing fierce competition from other furniture retailers.
The final company I would buy for my portfolio of UK shares is De La Rue. The banknote and passport producer recently came close to collapse, but management avoided the worst.
Now it’s on the recovery path. It recently reported adjusted operating profits of £15.3m for the six months to September 28 compared with £2.2m a year earlier. Based on its growth potential, the stock is dealing at a forward P/E of 11.6 and a PEG ratio of 0.6. A PEG ratio of less than one can indicate a stock offers growth at a reasonable price.
I should note, however, that De La Rue is in recovery mode at present. Therefore, if its recovery stumbles, the stock might not live up to expectations.
