Here’s how I’d invest £5,000 in the top UK stocks now

Harshil Patel considers the top UK stocks for investing £5,000 in a Stocks and Shares ISA.

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Mother, father and child girl in new house with a cardbox roof. Symbol of protection and property.

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If I’m investing £5,000 today, there are several methods I’d use to find the top UK stocks. One strategy is to look at current market themes.

The theme I’m looking at today is UK housing. For instance, figures from the Office for National Statistics show that on average, UK house prices rose by 10% in the year to May 2021. It’s likely that the temporary stamp duty holiday was a catalyst for many house buyers. 

The pandemic has also made many people rethink where they want to live. With more possibilities to work-from-home, people are searching for more space. Alternatively, they’re looking to revamp their current homes.

So how can I use this theme to invest £5,000 in top UK stocks right now?

Top UK stocks

I’d consider splitting my £5,000 to buy two of the top UK stocks that could benefit from the new home and renovations theme.

Whether buying a new property or renovating an existing one, I’d say kitchen manufacturers like Howden Joinery (LSE:HWDN) could benefit. Howdens is the UK’s leading supplier of fitted kitchens. Just recently, it reported a “strong first half performance”. With many new homes being bought, I imagine Howdens could benefit from a steady stream of business this year.

I’ve been following this company for many years and I really like its business model. In particular, it focuses on trade customers. Howden supports builders with competitive prices, excellent service, and stock availability. In turn, builders stick with them and become regular customers.

It’s a well-run operation in my view, offering double-digit earnings growth and reasonable profit margins. That said, economic uncertainties remain and it remains unclear if the recent trend in kitchen demand will continue at pace. Also, the rise in materials costs this year could potentially impact margins.

Overall, I like this FTSE 250 company and would consider buying it for my Stocks and Shares ISA.

A shrewd operator

Moving home can often require new furniture and furnishings. Leading homewares retailer Dunelm (LSE:DNLM) is well-placed to capture sales in this area. In fact, just this week it reported an encouraging fourth-quarter trading update. It highlighted robust sales from a range of categories. In particular, customers are buying bedding, curtains, and cushions.

I’d say Dunelm is one of the top UK stocks in the retail sector right now. In addition to strong sales growth, it’s expecting higher margins and profits. I like that the company is planning for future growth too. It recently committed to two new distribution facilities in the UK which will add capacity as sales grow.

Like many retailers this year, Dunelm flagged cost pressures across the supply chain. Although this could negatively affect profit margins if sustained, the company is focused on mitigating these costs. While the economic outlook remains unclear, the company is focused on gaining market share from competitors.

All things considered, I think Dunelm is a shrewd operator and would consider buying it for my portfolio.

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 considered so you should consider taking independent financial advice.

Harshil Patel has no position in any of the shares mentioned. The Motley Fool UK has recommended Howden Joinery 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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