As the first half of the year draws to a close, I think it’s a good time to reflect on my portfolio. Despite a positive six months in which the FTSE 100 has moved up 7% – compared to 14% over the past year – I am still hunting for shares to buy today for my portfolio. Here are five I’d pick.
Penny stock in banking
There aren’t many well known banks that trade as penny shares. Despite its price in pence not making triple digits, I continue to see Lloyds as a stock to buy today.
The group operates under a number of brands, which helps it appeal to a broad demographic range of customers. It has been improving its digital capabilities to help it fight the challenge of online competitors. The bank’s dividend restoration has also boosted its appeal for me, especially as the bank has indicated that it expects to raise it further in future.
But with its large UK mortgage book, one risk to the bank is any downturn in the housing market as it could lead to falling profits.
Software stalwart
Despite being one of the UK’s largest listed tech companies, Sage doesn’t seem to excite many investors. Its shares have added less than 2% over the past year.
Despite the stagnant price, I see these as shares to buy today for my portfolio. The company has a target market of small and medium-sized enterprises to whom it sells accounting software. Not only is that a large market, it’s also one I expect to persist. Such businesses will need to do accounts for years or even decades. Sage’s installed user base should make retention easier.
But one risk is the cost and effectiveness of the company’s cloud strategy. In its first half, revenue, earnings per share, and operating profit margin all fell. Against that, Sage Business Cloud Revenue grew 17% compared to the prior year. That’s impressive – but underlines that the company can’t afford for its cloud strategy to underdeliver.
Shares to buy today and hold
I continue to see long-term value in Diageo.
The drinks maker is poised to benefit from a rebound in demand in many markets. It has already been performing strongly in its biggest market, the US. In its first half it took share from rivals there as well as benefitting from drinks outlets restocking. That could happen globally.
There is a risk, though, that further lockdowns in some key markets could damage sales.
Medtech shares to buy today
I have a position in Renalytix and would still consider these as shares to buy today. The kidney diagnostics platform developer has had a strong start in the first half of 2021, recruiting an experienced team to help it with a sales push in the US.
One risk is competitors reducing Renalytix’s first mover advantage, which could squeeze future margins.
Dividend star
Tobacco manufacturer British American Tobacco has a lot going for it: strong brands like Lucky Strike, a fast-growing non-cigarette business, and huge cash flows.
It has a fair bit going against it too, though. That includes structural shifts in tobacco consumption and around £40bn of net debt. With a 7.5% yield, I would still pick the company for its income potential. But I recognise that, even after annual raises for over two decades, there is no guarantee of future dividends.
