2 great UK stocks to buy now

Roland Head highlights two companies he rates as top UK stocks to buy now. Both operate in a defensive and growing sector of the market.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Popular US shares seem to get all the headlines at the moment. But I reckon there are some great UK stocks to buy now — companies with proven success and the potential to keep growing.

In this piece I’m going to look at two UK shares from one sector I view as a long-term growth opportunity.

The first business I’m looking at today created a whole new segment of the market when it first launched. With clever marketing and a good product, Fevertree Drinks (LSE: FEVR) made us all believe that standard tonic water wasn’t good enough for expensive gin.

Despite growing competition, this 18-year-old business continues to dominate the premium mixers segment. Its share of the UK retail market for mixers is now around 40%. The company is also expanding rapidly in the US and elsewhere.

The best UK stock to buy now?

Fevertree’s share price has doubled from the lows seen last year. I don’t think the shares are cheap, but I think that its rare combination of strong growth and high profit margins may justify the share price.

Annual sales have risen by an average of 34% per year since 2015. Although UK sales fell last year due to pub and restaurant closures, US sales rose by 23% to £58.5m.

Growth has already picked up pace in 2021. During the first six months of this year, group sales rose by 34%, on a like-for-like basis.

I reckon Fevertree has further to go

The main risk I can see is that Fevertree’s expansion will slow unexpectedly. With the shares trading on around 50 times forecast earnings, a lot of growth is already priced into this UK stock. Slowing sales or pressure on pricing could see the shares struggle.

In recent months, higher transport costs have also hit the firm’s profits. This has caused management to cut profit guidance for the year.

These risks are real, but I believe the Fever-Tree brand has the potential to become a much bigger global name. If I’m right, then any short-term problems like transport costs are unlikely to matter much.

For this reason, I’d be happy to buy some of the shares today, as a long-term holding.

More popular than Coke!

In most countries around the world, Coca-Cola is the most popular soft drink. But not in Scotland. The top-selling fizzy drink north of the border is Irn Bru, which is made by Cumbernauld-based AG Barr (LSE: BAG).

Barr’s has been in business for more than 100 years and today makes a whole range of drinks. Other brands in the group’s portfolio include Snapple, Tizer, and Strathmore. AG Barr also produces the Funkin brand of pre-mixed cocktails, giving it some exposure to the alcohol market.

The obvious risk I can see with Irn Bru is that some of its brands are a little dated. It’s not clear to me how much growth potential they have. However, the company has managed to trade successfully for more than a century and — until last year — hadn’t cut its dividend for 30 years.

Trading so far this year has been better than expected. Management now says that profits are likely to be ahead of pre-Covid levels. I wouldn’t bet against Barr’s long-term growth. I see this business as a good UK stock I could buy for the next decade.

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.

Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended AG Barr and Fevertree Drinks. 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.

More on Investing Articles

Investor looking at stock graph on a tablet with their finger hovering over the Buy button
Investing Articles

Forget Lloyds’ cheap share price! I’d rather consider this FTSE 100 bargain share

Lloyds' share price might appear too cheap to miss at first glance. But this FTSE-listed share could be a better…

Read more »

Market Movers

Down 6% today, is the BT share price gearing up for a larger fall?

Jon Smith points out why the BT share price has tumbled today, but flags up why the reasoning behind the…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing Articles

This FTSE 100 stock is down 25% from its 52-week high. Should I buy?

Analysts think the price-to-earnings ratio of this FTSE 100 stock could fall by half in the next two years if…

Read more »

Investing Articles

£10,000 invested in Nvidia stock just two weeks ago is already worth…

Nvidia stock's been making big losses and big gains so far in 2025, at least on paper. But long-term valuation…

Read more »

Stack of British pound coins falling on list of share prices
Investing Articles

Here’s why Lloyds shares have dipped sharply

Lloyds shares got a boost recently when the Treasury petitoned the Supreme Court to go easy on the car loan…

Read more »

A young woman sitting on a couch looking at a book in a quiet library space.
Investing Articles

A £10,000 investment in BAE Systems shares 5 years ago is now worth…

BAE Systems' shares have lifted off since the start of the decade. But can the FTSE 100 defence giant continue…

Read more »

Dividend Shares

£8,000 invested in high-yield dividend stocks could make this amount of passive income

Jon Smith explains how dividend shares with yields in excess of 8% can be used carefully in order to build…

Read more »

Investing Articles

£5,000 invested in Tesco shares 2 years ago is now worth…

Over the last two years, Tesco shares have provided investors with gains of around 30% per year when dividends are…

Read more »