The FTSE 100 index is trading steadily at its highest levels since the pandemic. It’s up 3.3% in the last month, dispelling my concerns of a potential market crash after the Evergrande collapse in China. I think it’s a great time to catch some excellent shares on their way up and here are the three UK shares I’m watching closely now.
Pharma drama
Over the last decade, the pharma sector has been under scrutiny for hiking the prices of life-saving drugs. Distrust of big pharma is at an all-time high in some quarters with the pandemic fuelling existing concerns over the cost of medication. I think FTSE 100 company Hikma Pharmaceuticals (LSE:HIK) addresses this issue.
The pharma company specialises in low-cost, generic versions of popular medication. This is an area that I think shows a lot of promise. Although R&D in the field of medicine is paramount, I think the ageing British (and global) population will benefit from low-cost treatment options as well.
From a potential investor’s perspective, a return of -4.3% in 2021 might seem like a red flag, but when I look at the five-year graph, Hikma shares have increased steadily, offering a robust 51% return. The first-half 2021 report makes for good reading. Revenue was up 7% to US$1.2bn and operating profits were up 10% at $326mn.
But, Hikma shares have had a turbulent run in the market over the last five years. This tells me that shareholder confidence isn’t great. And there are concerns surrounding inflated revenue in the injectables division of the company, which received a temporary sales boost during the pandemic. This is expected to drop in the coming months, which could dent revenue.
However, the company looks like a good long-term investment for my portfolio and operates in a sector that I think will remain crucial. It’s on my FTSE 100 shares to buy list for November.
Mining share up 125% in a year
Glencore (LSE:GLEN) is the world’s largest commodity trader with large mining operations as well. The company has 26 coal mines around the world and is a major producer of cobalt, copper and Nickel — all crucial components in electric vehicle (EV) manufacture.
Commodities prices are rising globally and I think Glencore stands to gain a lot from this. When I look at its market performance, the whopping 125% returns in 12-months are impressive. And they come with a 2.4% dividend yield as well. Its shares are currently on a small downtrend, falling 2.7% in the last week. I think its current price of 253p is an excellent entry point for my portfolio.
The company’s 2021 half-year report showed a 32% increase in revenue to US$93.8bn, a 4% increase in total assets to $122.4bn and a 33% decrease in net debt, which stood at $10.6bn.
The mining company is also well-positioned to cash in on the coal shortage in Asia. But over the long term, commodities prices could normalise, which will cut into Glencore’s profits. And there are ethical concerns and the environmental impact of the mining sector as a whole (especially coal), which Glencore will have to address in the coming years. But I think the surge in construction after the pandemic and the increase in production in EVs sets up Glencore for sustained returns, which is why it also makes my FTSE 100 buy list.
