If I had money to put to work in the market right now, I wouldn’t be able to resist asking myself whether the timing was right. What if there’s a market crash around the corner that would lead to better bargains among UK shares?
But it’s hard — if not impossible — for a private investor like me to time the market. Instead of holding back in fear, I’d do what I always do in any market – look for good value. Here are two shares I’d consider buying today. If I had £1,500 to invest in my portfolio, I’d split it evenly between them.
UK income choice: Imperial Brands
There’s no doubt that tobacco faces risks ahead. Declining cigarette consumption in many markets threatens future revenues and profits, as do regulatory threats. That may make it seem strange that while rivals such as British American Tobacco forge ahead growing their non-combustible business, rival Imperial Brands (LSE: IMB) this year adopted a different strategy.
Imperial is also selling non-combustibles, although it has scaled back its ambitions in that area. It’s focused on trying to make the most of cigarette demand while it lasts, by improving its marketing and sales efforts in key markets. That risks being an overly short-term approach – what happens if overall cigarette volumes continue to decline? A growing share of a declining market will ultimately reach growth limits.
But against that, I think the strategy demonstrates a couple of points about Imperial’s direction of travel. First, the strategy helps buy the company time as the tobacco market evolves. As it hopefully milks its cigarette cash cow while it can, it can also use the funds to help reshape its longer-term vision. Second, it shows a mature approach to tackling the company’s challenges. Previous management raised the dividend steeply even while sales struggled. Today, Imperial looks more prudently run and is tackling the future head on. Meanwhile, it offers a 9% yield. I’d happily buy more of the shares for my portfolio today.
UK shares for growth
Over the past few years, the company has grown revenues and profits in most years – and the share price has risen to boot. The JD Sports share price is 33% higher now than it was a year ago. But I think the best may still be to come from this company.
JD Sports bounce-back
As this week’s results demonstrated, JD’s strategy of international expansion is delivering strong business momentum. The biggest first half of sales it has ever recorded was fuelled by federal stimulus in the US. That helped results across JD brands such as Shoe Palace.
But more than any one market’s contribution, what attracts me to these UK shares is how well JD has bounced back from last year’s trading challenges. Revenue of £3.9bn and pre-tax profit of £365m demonstrate the strength of the business and its continued growth. One risk is that the international expansion could dilute management focus. If that happens it could be bad for the company’s profits.
Christopher Ruane owns shares in British American Tobacco and Imperial Brands. The Motley Fool UK has recommended British American Tobacco and Imperial Brands. 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.