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UK shares: 1 stock to buy and 1 to avoid

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I am always looking for the best UK shares to bolster my portfolio. I have recently identified one stock I would consider adding to my portfolio and one I would avoid.

FTSE 250 soft drinks manufacturer

Britvic (LSE:BVIC) is one stock I would seriously consider for my portfolio now. The branded soft drinks producer is one of the biggest players in the UK market. In addition to the UK, it also has global reach with operations in Ireland, France, and Brazil. Some of the brands it produces and sells are Tango, J20, and Robinsons. Britvic also has an exclusive and lucrative agreement with soft drinks giant PepsiCo.

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As I write, shares in Britvic are trading for 859p per share. This time last year shares were trading for 761p per share, which is a 12% return. Most of the UK shares I currently like would have offered me a nice return if I had invested a year ago.

Despite my bullish stance towards Britvic, I have to admit the pandemic caused a dip in performance. Full-year results to September 2020 saw revenue fall and the dividend cut by over 20%. Britvic was still able to increase profits, however. This helped it to pay a dividend when many other UK shares suspended them.

Analyst forecasts support my bullish attitude. I understand forecasts may not come to fruition, but Britvic has an excellent track record, a robust balance sheet, and a great growth record too. Analysts believe that earnings will increase by over 25% for the current full trading year compared to last year and the share price will increase too. In addition, it is believed that the dividend will rise to pre-pandemic levels. UK shares that make me a passive income are very tempting.

Although I would add Britvic shares to my portfolio, I must consider some credible risks. The haulage crisis in the UK could affect operations and finances. In addition, Brexit pressures could also play a part. The rising costs of raw materials could affect the bottom line as well.

Holiday operator to recover?

FTSE 250 incumbent TUI (LSE:TUI) is one UK share I will avoid. The German multinational travel and tourism firm is recognised as one of the largest in the world. 

With the economic reopening in full swing, could this depleted stock recover? I don’t think so. As I write, TUI shares are trading for 270p per share. A year ago shares were trading for 241p. Despite this increase across a 12-month period, the TUI share price has been on a downward trajectory for some time.

The reason I am bearish towards TUI is due to a few factors. Firstly, TUI’s operations have relatively fixed costs, which means profit is harder to come by. Next, when the pandemic struck, TUI had to borrow to keep the lights on and its debt level is concerning. Finally, the Covid-19 virus has not disappeared. Further travel restrictions could hinder any recovery.

Recent Q4 results were encouraging. TUI reported an increase in customer bookings compared to last year and future bookings look healthier too. It also completed a further capital increase of €1.1bn, which will help steady the ship. 

Overall I do think the worst could be over for TUI but I will still avoid buying shares right now. I believe there are better UK shares out there.

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Jabran Khan has no position in any shares mentioned. The Motley Fool UK has recommended Britvic. 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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