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3 top UK stocks to buy in July

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UK stocks are continuing their bull run. The FTSE 100 index is around 5% below its pre-pandemic level. With improving economic data, I am more optimistic about the general stock market. 

Here, I have selected three stocks that I am consider buying for my long-term portfolio.

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My top UK stocks

The Barclays (LSE: BARC) share price is up 50% in the past year. I like the bank for its diversified business model. It has two divisions, namely Barclays International and Barclays UK, which are both doing well. The recent results were good, helped by the improving economic outlook. It has a strong brand in the UK and also globally. The bank is well capitalised with a common equity tier 1 ratio of 14.6%, well above the regulatory requirement of 11.1%.

One key risk for the stock is that it has performed very well in the past year. There could be some investors who might sell their shares to lock in their profits. This could lead to a fall in the share price in the near term. Also, the banking sector faces stiff competition from fintech companies, possibly putting pressure on the bank’s growth.

Boohoo (LSE: BOO) has strong revenue growth. In the most recent quarter, its revenue grew by 32% to £486.1m. Another reason why I like this UK stock is that it is profitable. The gross margin in the most recent quarter was 55%. Recently acquired brands like Dorothy Perkins, Wallis, and Burton have increased the firm’s brand value. The company has also launched the new Debenhams digital department store, which in my opinion should complement the company’s growth story.

Despite the various advantages, I am watchful of the risks. Boohoo has benefitted from the lockdown as a result of the increase in online shopping. Now with full re-opening of the sectors, the growth rate might slow down. In fact, this is likely, as management has given guidance of a 25% revenue growth rate, which is below the historical growth rate of above 40%.

Turnaround company

My third pick is Royal Mail (LSE: RMG). The company has made the shift in its business to parcels from letters. It has a vast network in the UK to make timely deliveries. Its turnaround plans in the past had been delayed and now finally are bearing excellent results. The company’s share price rose about 240% in the past year. After years of lagging growth due to the drop in letters, the company’s revenues grew by 17% to £12.6bn in the fiscal year 2021. Pre-tax profits jumped to £726m from £180m in the previous year.

One key risk for this UK stock is that the pandemic had accelerated online shopping, which led to the growth in the company’s parcel division. However, it is uncertain whether this trend will continue. Also, the parcel business is very competitive, which could put pressure on the company’s profits.

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Royston Roche has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays and boohoo group. 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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