Up one day, down the next. The FTSE 100 and other UK shares have been swinging between optimism and pessimism.
But in volatile conditions like these, I reckon it’s a good time to focus on buying the shares of good businesses. And if I hold my selections for a long time, short-term market fluctuations become less important.
Why I think these are UK shares to buy
Right now, for example, I’m keen on geotechnical and groundworks contractor Keller (LSE: KLR). The company issued a positive outlook statement in May. And the business has been recovering well from the challenges of the pandemic.
City analysts expect earnings to rebound higher by around 27% in 2022. And with the share price near 847p, the forward-looking price-to-earnings ratio is just below 10. I think that looks like good value. And on top of that, shareholders will likely collect a dividend for the 2022 trading year, yielding just over 4.5% measured against today’s share-price level.
Meanwhile, the growth strategy is rolling out at pace. And on 14 July, Keller announced the bolt-on acquisition of a geotechnical company called RECON Services in America. The directors said the purchase will help Keller become “the preferred international geotechnical specialist contractor.”
Overall, in a world that looks set to focus on infrastructure development as it ‘builds back better’, I think Keller looks well-placed. However I could, of course, be wrong. And if further general economic weakness causes earnings to slip, I could easily lose money on the shares. Nevertheless, I’d embrace the risks now and add the stock to my long-term diversified portfolio.
But I’d also play the long-term recovery and growth theme with Braemar Shipping Services (LSE: BMS). The company is an international shipbroker and also provides advice in shipping investment, chartering, risk management and logistics services.
Riding the gathering recovery
I’m bullish on the long-term potential for world economies to recover and prosper in the years ahead. And I reckon businesses providing shipping services will likely do well if commercial activity increases.
And in the full-year results report released on 3 June, chief executive James Grundy appeared optimistic as well. He said the business exceeded the directors’ expectations for financial performance in the trading year to February. And there was progress in realigning the business to a new, “growth-oriented” shipbroking strategy.
Grundy thinks Braemar is in a good position to capitalise on ongoing global recovery. And he said the outlook “for the next few years” is positive. Meanwhile, City analysts expect earnings to make some impressive double-digit percentage advances in the current trading year and in the following year to February 2023.
Looking for higher earnings ahead
With the share price near 288p, the forward-looking earnings multiple is just below 11. I don’t think that’s an outrageous valuation. But I wouldn’t expect the price-to-earnings number to move much higher. After all, shipbroking remains a cyclical pursuit. And there’s potential for earnings and the share price to fall in the years ahead… as well as the possibility they could move higher.
I reckon the success of an investment in Braemar Shipping Services now relies on ongoing progress with earnings. And that seems likely, to me. So I’d embrace the risks and buy the stock now.
