1 UK share I would buy and 1 I would avoid 

These UK shares prices have risen, but Manika Premsingh would not buy both of them. One has clearly stronger prospects than the other. 

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

As stock markets inch up, there has been a broad-based increase in UK share prices. But not all stocks have equally good prospects. Here are two examples of stocks whose share prices have risen over the past few months. But I would buy one and avoid the other.  

SThree: robust performance

Recruiting company SThree (LSE: STEM) is trading near all-time highs today after it released a robust trading update. Net fees charged by it grew by 22% in the second quarter of 2021 compared to last year. Even compared to 2019, the science, technology, engineering, and mathematics (STEM) focused company has seen an 8% increase. This tells me that the company has put the pandemic’s impact behind it. 

Supported by diversification

I reckon that its diversification has helped here. Almost half of the company’s business comes from technology, followed by life sciences and engineering. Banking and finance accounts for less than 10% of it. The past year has been poor for financials, as the sector is closely linked to economic performance. On the other hand, a look at FTSE 100 technology related companies from software providers to e-tailers shows that they have had a positive year. Some smaller life sciences companies have also benefited from research on Covid-19 drugs, tests, and vaccine development. 

SThree is also geographically diversified. Germany is its biggest source of revenues, followed by the US and Netherlands. The UK is only its fourth largest market. All its top three markets have grown in the first-half of 2021, with the US having shown the most notable increase of 24%. 

Although the company has held back from any forward looking statements this time, it does mention an upgrade in its profit expectations for the year made earlier this month.

I think all looks well for SThree, but it is at a high. And some patience may be required before it shows big returns from here. That said, it looks like a good long-term stock for me to buy. 

Saga: lack of clarity

By contrast, cruise operator and insurance provider Saga (LSE: SAGA) appears less like a sure thing to me. Before the pandemic, cruises brought in more than half its revenues, followed by a big share from insurance. However, cruise revenues have dwindled as travel remains under lockdown. With strong cruise bookings, I would typically be less concerned about the current weakness in the segment. 

However, these bookings will materialise only if government restrictions are lifted. With a rise in Covid-19 infections, there is much media speculation on whether the final phase of the lockdown will indeed be lifted in time. Moreover, its insurance sales are also behind last year. 

My takeaway for the UK shares

Saga could be a good share to buy if I am convinced about the prospects for the travel industry. At this point, however, I am not. I would like to wait and see how the situation develops and make a decision accordingly. On the other hand, SThree looks like a good UK share for me to buy today, whether or not the markets rise

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Manika Premsingh 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.

More on Investing Articles

Illustration of flames over a black background
Investing Articles

Here’s another top buy from the FTSE 250 I’m considering

Oliver Rodzianko considers this FTSE 250 company a stellar choice for his portfolio. It's on his growth watchlist; so let's…

Read more »

A young Asian woman holding up her index finger
Investing Articles

A “once in a lifetime” opportunity for Rolls-Royce shares?

One firm is hoping now is a “once in a lifetime” opportunity for UK nuclear companies. Our writer reveals whether…

Read more »

Young Black woman looking concerned while in front of her laptop
Investing Articles

The IAG share price is dirt cheap and profits are flying. So why am I worried?

After today's positive full-year results, I expected the International Consolidated Airlines Group (IAG) share price to be doing better than…

Read more »

Investing Articles

Is Tesla stock a steal below $200?

Tesla stock has fallen 19% so far in 2024. Currently hovering around $200, this Fool checks if now is the…

Read more »

Investing Articles

3 high-yield dividend stocks to consider for my passive income portfolio in 2024

I want to build a portfolio of dividend stocks that pay enough passive income to retire comfortably. Here are my…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

Direct Line shares soar 25% on takeover bid!

Direct Line shares surged by a quarter on Wednesday, after receiving a takeover bid from a Belgian rival. But the…

Read more »

Investing Articles

Will it be too late to buy Nvidia stock in March?

NVIDIA stock is up more than 60% since the start of 2024. Our writer considers whether it might still be…

Read more »

Typical street lined with terraced houses and parked cars
Investing Articles

Why did Direct Line shares just soar 27%?

Direct Line shares have jumped more than a quarter in the course of today's trading session. Our writer explains why…

Read more »