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3 boring but brilliant UK stocks to buy

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Dull but consistently profitable companies can often be great investments. Today, I’ll touch on one example each from the small-cap world, the mid-cap space and the FTSE 100.

Locking in profits

I first covered self-storage firm Lok n’ Store (LSE: LOK) in April 2018. Since then, its share price has climbed almost 90%. That’s hardly a bad result considering the simplicity of the company’s business model.

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As today’s update showed, there’s no shortage of demand for space to store possessions. Trading over the year to the end of July has been “excellent” with occupancy rates bouncing to 85.8%. Back in mid-2020, this was a little under 70%. Revenue also rose 20.9% on the previous year and is “continuing to accelerate“. 

At £225m, LOK is far smaller than its peers Big Yellow and Safestore. However, it’s quietly building a sizeable estate. A pipeline of 13 sites will give the company 38% more space and should provide another boost to earnings. Whether this and recent trading are enough to justify the current valuation is another thing.

LOK trades at 39 times forecast earnings. That’s steep given the lack of barriers to entry in this industry. So, while I’d still buy today (no one knows where share prices will go next), I’d probably wait for the next, inevitable, market wobble before fully investing my capital here.

Rubbish trading

Another example of a company operating in a dry as dust sector that’s nevertheless done well for investors is waste manager Biffa (LSE: BIFF). Its shares are up almost 80% over the past year. 

As at LOK, this momentum looks likely to continue. Trading in the first three months of its new financial year was “well ahead” of even BIFF’s own expectations. Although the outlook is tied to the UK economy, management now thinks adjusted earnings for the full 12 months will come in roughly 10% higher than analysts were predicting.

There are a few near-term headwinds to consider though. The much-publicised shortage of HGV drivers is one. Ongoing issues with Biffa’s supply chain due to Covid-19 could also knock sentiment. 

Then again, the shares still trade on a reasonable valuation of 19 times forecast earnings. As such, I would feel comfortable taking a position today.

Profiting from pests

A final pick of boring but brilliant UK stocks for me to buy is FTSE 100 pest control giant Rentokil Initial (LSE: RTO). The £10bn cap company is a world leader at what it does.

Like the other stocks mentioned, RTO has done well for those owners able to sit on their hands. Those buying back in 2016, for example, will be sitting on a gain of around 150%. Now that its core business is showing signs of rebounding from the pandemic (revenue growth of 18.3% was seen in the first six months of 2021), I suspect the shares could go on setting new highs.

There are still risks, of course. A valuation of 33 times earnings suggests a lot of good news is already priced in. Should the global economic recovery slow, it’s arguably the pricier growth stocks that will be hit the hardest.

Then again, this is far more defensive than the typically glitzy tech play. Again, while I wouldn’t throw everything at the stock today, I regard this solid company as one to drip-feed my money into gradually. 

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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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