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UK shares: 2 stocks to buy with £2K

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If I had £2K to invest right now, two UK shares I like for my portfolio are ITV (LSE:ITV) and Barratt Developments (LSE:BDEV)

ITV going digital

As I write, shares in ITV are trading for 105p per share. A year ago, shares were trading for 72p per share, which is a 45% return. At current levels, ITV is trading at a price-to-earnings ratio of close to 13, which I consider undervalued.

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ITV is one of a number of UK shares that suffered due to the pandemic. It has also been on a downward trajectory for the last few years. A recent shift in strategy towards digital transformation has seen the television broadcaster bounce back. I believe it could be a good recovery play in the long term.

H1 results announced in July showed ITV’s recent recovery progress. Revenues increased by 27% to £1.5bn. Revenue for ITV Studios, which produces content for its own and other channels, grew by 26% alone. An influx of advertising revenue was also a nice bonus for ITV.

I like ITV due to its recent impressive results, its production arm producing excellent content, and digital transformation with growth in its streaming subscription numbers. I view it as a bargain UK share at current levels. The pandemic meant cancellation of dividends but a dividend is intended for FY 2021, which is a nice bonus.

Barratt Developments

The UK housing market has hit highs it has not seen since 2004. With this in mind, some house builders like Barratt Developments could be a shrewd addition to my portfolio.

As I write, shares are trading for 659p. At this time last year, shares were trading for 529p, which is a 24% return. At current levels, shares are trading with a price-to-earnings ratio of just over 10, which I consider cheap.

Barratt is among a group of house builder UK shares to report positive trading recently. Last week Barratt announced an update for 1 July to 10 October which made for good reading. The highlights I took from the update were that reservations remained “strong” despite the Stamp Duty holiday ending. If I compare net reservation rates to pre-pandemic trading, the rates are up by over 18% compared to the same period in 2019. Barratt’s share price is up close to 5% since the update was announced.

Overall I am buoyed by the recent activity in the UK housing market. I believe Barratt, as one of the premier house builders in the UK, could be a good addition to my portfolio. Pent-up demand and economic reopening could boost performance and offer me a nice return as a potential investor.

UK shares have risks

I must consider the risks involved in investing.

ITV is in a competitive market and has suffered in the past from loss of market share to more savvy, digitally prepared competitors. Subscription video on demand (SVOD) accounts for 25% of TV viewership in the UK and there are plenty of players in the market. ITV will need to make sure it can remain ahead of the curve with quality content and a good user experience.

Barratt Developments could suffer due to rising costs, logistics and haulage issues, and inflation. It is worth noting these issues are affecting all house builders. These issues could slow progress on building sites and eat into profit margins as well.

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