3 UK shares to buy

This Fool outlines three UK shares he’s looking to acquire based on their growth prospects in the next few years.

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Looking at the latest economic data, I think the UK economy is set for a strong recovery this year. With that being the case, I’ve been searching for UK shares to buy, which may capitalise on this rebound. 

Here are three blue-chip companies I’d buy for my portfolio that I think could benefit or are already benefiting from surging demand. 

UK shares to buy

The first company on my list is B&Q owner Kingfisher (LSE: KGF). All indicators point to the fact that the DIY and construction market across the UK is recording rapid growth.

As one of the largest DIY retailers in the country, Kingfisher is and could continue to benefit from this trend. According to its first-quarter trading update, like-for-like sales in the three months to the end of April increased 22.5% compared to the same period in 2019. 

Based on this growth, the corporation now expects to report a pre-tax profit ahead of previous expectations for the year. That’s one of the key reasons the firm is on my list of UK shares to buy. 

Of course, the company isn’t guaranteed to hit this target. Another economic lockdown could upset forecasts, and rising costs could eat away at profit margins. This may cause management to revisit profit projections. 

Still, I’d buy the stock for my portfolio today. 

Financial markets

Another company that sits on my list of the best UK shares to buy is the London Stock Exchange (LSE: LSEG). It’s currently experiencing one of its most lucrative periods in recent history. In the first quarter of this year, LSEG saw its strongest IPO start to the year since 2007, with 20 floats raising £5.6bn. This could produce windfall profits for the exchange operator.

As well as this boom, the firm may report higher revenues from increased trading volumes if the UK economy reports strong growth in the years ahead. 

Unfortunately, stock markets are incredibly cyclical. The current IPO boom may not last. And if economic growth slows, trading activity might fall. This would almost certainly impact the group’s top and bottom lines. 

Despite these risks, I’d buy the stock for my portfolio today as a UK recovery play. 

Pent-up demand 

The final business on my list of UK shares to buy is the over-50s lifestyle company Saga (LSE: SAGA). While this enterprise came close to the edge last year, it’s taking on the reopening with a stronger balance sheet and re-focused business model. According to its latest trading update, demand for its cruises in the next few years is running ahead of expectations.

Meanwhile, its financial services business provides a steady stream of profits to support the rest of the group.

To develop the financial arm, the company recently appointed Steve Kingshott as Insurance CEO. He’s currently CEO of Tesco Underwriting and chief insurance officer at Tesco Bank.

Key challenges the company faces are a lack of growth in its financial business and coronavirus restrictions, which could derail recovery plans at the cruise division. A further setback may also place pressure on the group’s balance sheet. 

Nevertheless, I’d buy the stock for my recovery portfolio today as I think it’s one of the best UK shares to buy for the reasons outlined. 

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.

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.

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