If I had £20,000 to invest today, I’d buy a basket of top UK shares.
What I mean by this is that I’d seek out the highest quality stocks on the market. These would be companies with substantial competitive advantages, strong balance sheets and wide profit margins.
I’d also be looking for companies that support attractive and sustainable dividend yields, although this isn’t a deal-breaker. Sometimes, the best businesses invest all of their earnings back into the business. This strategy can help turbocharge growth in the long run if corporations spend their money wisely.
Here are some of the top UK shares I’d buy with £20,000 today.
Stock market champions
Rio Tinto is one of the largest producers of iron ore in the world. This is the company’s competitive advantage. Due to its enormous scale, the firm can produce a tonne of iron ore for just a fraction of the cost of its competitors. As a result, it’s highly cash generative, and management has a track record of returning excess cash to investors. The stock currently supports a dividend yield of 6.5%.
These are the reasons why I’d acquire this business for my portfolio of top UK shares. Some risks the company may face include volatile commodity prices and high wages, which could harm profit margins.
Elsewhere, I would also buy 4imprint. This promotional products company took a hit in the pandemic, but its sales are now rebounding. It processed 616,000 total orders in the first half, up from 470,000 in the first six months of 2020 and 778,000 in the first half of 2019. It also added over 100,000 new customers.
The organisation has a strong track record of growth and nearly $60m of cash on the balance sheet to support its recovery. These are the reasons why I’d buy the stock today. The most considerable risk the group faces is another economic slowdown. This could impact its recovery.
Top UK shares
One of the best-performing companies on the London market over the past decade has been Avon Protection. However, the safety equipment supplier has recently hit stormy waters. In August, it cut its profit outlook by 40%. The stock slumped after this revelation.
While the update’s disappointing, Avon still owns valuable intellectual property which has helped it win contracts in recent years. I think this competitive advantage will help the group return to growth in the years ahead. That’s why I would buy the stock.
Challenges the company may have to overcome in the future include competition and higher wages.
Finally, I’d buy Centamin for my £20k basket of top UK shares. I think this company is one of the best-run gold miners in the world.
It had available cash and liquid assets of $312.1m as of 30 June and has paid dividends equivalent to a yield of 12% this year.
With the stock trading at a price-to-earnings (P/E) ratio of 9.6, I think it looks cheap. That said, if gold prices suddenly decline, Centamin’s profits could also plunge.
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Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended 4imprint Group and Avon Protection. 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.