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3 of the best UK shares to buy now

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With several companies set to release updates, I expect a lot of significant market movements in either direction in October. This also comes at a time when the fear of a market collapse is causing a fall in global indices. Rather than panic-sell, I see this as an excellent time to invest in some shares at cheap prices. Here are three UK shares to buy now that I think could see sustained growth in the coming months despite the turbulence.

Steady income share

Legal & General (LSE: LGEN) is my income pick for October. I love shares that offer a strong dividend because of the prospect of steady passive income. I feel LGEN looks like the best FTSE 100 bargain at the moment factoring in the 6.5% dividend yield.

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The financial services company posted excellent first-half (H1) 2021 figures. It recorded an operating profit of £1.07bn, up 14% from H1 2020. Earnings per share went up 21% to 17.78p from the pre-pandemic H1 2019 period. As a potential shareholder, the return on equity (ROE) growth of 22% was also very impressive.

Analysts remain bullish on the stock because of the extremely low price-to-earnings (P/E) ratio of 7.2x and the increasing dividend yield. In fact, the company has increased dividends steadily over the past decade.

The UK finance sector is very crowded and LGEN faces competition from the likes of Aviva and Prudential. Also, shockwaves from a market crash could send the economy into a tailspin, which will affect the finance sector. But, LGEN shares are a bargain at 277p and earns a spot on my list of UK shares to buy now.

FTSE 100 staples

I’ve been bullish on Diageo (LSE: DGE) shares for a while now. And looking at its share price down 1% today, I’m watching the alcohol brand closely for a rare extended downtrend and a chance to snap up some shares at a cut price.

The impressive 33.4% return over the last 12 months shows Diageo’s recovery post-pandemic. Its operating profits in fiscal year (FY) 2021 grew a whopping 75% to £3.7bn and could increase further in FY2022 as pubs and bars reopen globally. This has analysts buzzing and my colleague Stuart Blair thinks Diageo shares can hit 4,000p next year.

The P/E ratio of 31.4 means Diageo shares are overvalued at the moment. Also, alcohol sales are diminishing with youngsters becoming increasingly health-conscious. But the company is making moves in key overseas markets and has a strong international presence. Impressive sales figures and large global market share puts Diageo on my UK shares to buy watchlist .

Another FTSE 100 share I’m looking at closely is BAE Systems (LSE: BA). Strong financials, an enviable £35.5bn order book and a P/E ratio of 10.1 almost guarantee strong returns in my opinion.

A 15.5% gain over the last 12 months might seem underwhelming, but I feel it’s made up for by the above-average 4.3% dividend yield which is twice covered by earnings. The company expects a significant jump in earnings before tax in 2021 and a 7% increase in revenue. 

BAE operates in a volatile sector where trade restrictions and budget cuts are always a concern. But, I expect a strong H2 2021 report that could significantly increase its share price, which earns it a spot on my UK shares to buy now list.

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Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo. 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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