With the first half of the year drawing to a close this month, many investors will be reviewing their portfolios. I have been doing that – and thinking about what the best shares to buy now are.
Here are three UK shares I’d buy for my portfolio today.
Investor Warren Buffett talks about the benefit of a company having an economic ‘moat’. That is something that helps to defend it against competitors. For example, owning unique brands with customer loyalty can provide such a moat.
A company I think possesses such a moat is Unilever. Its collection of brands such as Domestos and Lifebuoy helps it achieve premium pricing on simple household goods. Its exposure to developing markets helps pave the way for future growth. Meanwhile, the company’s cash generation supports substantial dividends. Currently, Unilever yields 3.4%.
Why would I buy it today? With just 1% appreciation in the Unilever share price over the past 12 months, it is around 15% down from where it sat a couple of years ago. But with a heightened customer awareness on hygiene following the pandemic, I think the demand outlook looks good.
One risk is a decline in personal grooming as people interact in person less. That could hurt sales of products like shampoo and deodorant.
Best shares to buy now: S4 Capital
Another share I’d consider adding to my holdings is digital marketing group S4 Capital. The shares are close to an all-time high — so why would I still buy?
The rise in digital advertising has been significant. I think it is here to stay. Global companies like Mondelez and BMW appreciate the convenience of working with digital marketing experts across multiple markets. That helps a company with global reach like S4, which counts both among its clients.
S4 has gathered a collection of agencies many of which have excellent reputations in their home markets. That, combined with buoyant demand, is why I rate S4 Capital among the best shares to buy now for my portfolio.
One risk is the company’s heavy exposure to tech clients. While it has been broadening its roster, tech still dominates. Any slowdown in spending in the tech sector could ricochet across S4’s revenue.
High yield choice
Tobacco might not have the growth prospects seen in digital advertising. But industry behemoth British American Tobacco has nonetheless demonstrated an ability to grow revenues. It expects constant currency revenue growth north of 5% this year.
The real reason I see BAT as among the best shares to buy now for my portfolio, however, is not growth but income. A juicy 7.3% yield is covered by earnings. The company has been disciplined about its target payout ratio of 65%, which reduces my concerns that this share could be a value trap.
There are risks, though, including a debt pile of around £40bn. Paying that down could reduce the company’s ability to fund dividends.
christopherruane owns shares of British American Tobacco, S4 Capital plc, and Unilever. The Motley Fool UK has recommended Unilever. 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.