Best stocks to buy now: 3 UK shares I’d snap up with £3k

Profits are rising at these well-known UK companies. Roland Head explains why he thinks they could be three of the best stocks to buy now.

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The UK stock market has seen a surge of recent takeover bids. I reckon this highlights the good value that’s on offer at the moment. Here, I’m going to look at three UK shares I reckon could be the best stocks to buy now.

The most impressive turnaround of 2021?

When I last looked at Royal Mail (LSE: RMG) in March, I took a cautious view. Certainly, I was impressed by the group’s turnaround. But I wondered if the e-commerce boost driven by the pandemic might soon start to fade.

Looking back, I think I may have been too cautious. Royal Mail says early signs suggest parcel volumes will remain permanently at a higher level. That matches up with the experience in my household. We’ve continued to buy things online that we bought in shops before the pandemic.

In fairness, the pandemic is hardly history just yet. Royal Mail has warned there’s still “significant short-term uncertainty” about future parcel and letter demand. Even so, I’ve been impressed by the postal operator’s renewed profitability.

RMG shares have pulled back from the highs seen in June and are now trading on eight times forecast earnings, with a dividend yield of 4%. I think this could be one of the best stocks to buy now.

How I’d invest in China

FTSE 100 bank HSBC Holdings (LSE: HSBA) recently reported a sharp rise in half-year profits. The bank said that losses from the pandemic had been smaller than expected, so far.

Although HSBC’s share price performance has been disappointing in recent years, the bank’s performance appears to be improving under chief executive Noel Quinn.

For me, the main attraction is that it makes most of its profits in China and Hong Kong, but provides UK investors with the security of a London-listed FTSE 100 business.

The downside of this structure is that HSBC is sometimes caught between the conflicting political strategies of China and Western governments. This can be challenging to handle, but the banking group’s been operating in this way for more than 150 years. I reckon it’ll continue to find a way forwards.

With the shares offering a dividend yield of 4% and trading less than 10 times earnings, I’d be happy to buy HSBC today.

The best stock to buy now?

My final pick is another FTSE 100 company with a very long history. Defence group BAE Systems (LSE: BA) can trace its origins back 450 years through its ownership of the former Royal Ordnance organisation. BAE’s history also includes famed names such as Vickers, Vosper Thornycroft and Sopwith Aviation.

Today, the group is a diversified business that builds military aircraft, ships, weaponry, and technology systems. BAE’s performance was pretty stable in 2020 and the company was still able to increase its dividend, giving the stock a yield of 4.2%.

The main risk I can see for investors is the company’s heavy exposure to Saudi Arabia and other Middle Eastern markets. This may not suit everyone and has the potential to cause political problems in the UK.

Even so, I admire BAE’s consistent profitability and long-term growth record. It’s certainly a business I’d be happy to hold in 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 assessed. Consider taking independent financial advice.

Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended HSBC Holdings. 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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