UK shares haven’t performed particularly well this year, with exceptions in oil and mining. And while the FTSE 100 might have closed Wednesday above 7,500 for the first time in two months, many stocks are still down in 2022.
The thing is while the FTSE 100 might be back up to this benchmark figure, oil and mining stocks have delivered a lot of the growth for the index this year.
Other stocks have been pulled down amid concerns about the health of the global economy, as well as the British economy, ongoing concerns about Brexit, and political turmoil.
But I see now as a good time to invest while stocks are down and before the eventual recovery. So here are two UK stocks I’m buying before the end of August.
Lloyds
Lloyds (LSE:LLOY) is still trading far below its 52-week high, despite improving throughout the year. The performance of Lloyds and other British banks tends to reflect the growth of the UK economy.
But it’s a little different right now. Amid 1970s-esque inflation, interest rates are rising in an effort to slow economic activity. Higher interest rates mean higher margins, and Lloyds is already benefiting here.
UK mortgages represented 61% of Lloyds’ total gross lending at 2021 year-end. The bank is clearly heavily focused on the British market. And mortgage repayments are already soaring in the UK as a result on rate rise.
The average repayment was up £70 a month before the last 50 basis point hike. So it’s clear these incremental changes in mortgage rates will have a profound impact on the bank’s income.
As the economic conditions get worse, there will be concerns about new mortgage volumes and the growth of bad debt. However, the forecast recession is likely to be quite mild, albeit prolonged. So I’m still backing Lloyds and I’d buy more today.
Unilever
I’m also buying Unilever (LSE:ULVR) for its defensive qualities and its non-pound earnings. In July, the fast-moving consumer goods giant said that profits were up during the first half as sales revenue grew 8.1%, but volume fell 1.6%. The business, which owns brands such as Dove, Vaseline, and Magnum ice cream, lifted its prices by 9.8% in H1, compared to the same period of 2021.
Unilever expects to beat its previous forecast of sales growth between 4.5% and 6.5% for the year as a whole. The recent data highlights the importance of a strong brand and underlined Unilever’s ability to pass on rising costs to customers.
Unilever also sells goods in 190 countries, so a weak pound may help inflate revenue.
Going forward, there may be some challenges with recession forecasts looming. Unilever has defensive qualities but a prolonged recession is unlikely to be good for the business. Despite this, I’m confident it will perform better than other business in such an environment. And this is why I’m buying more Unilever stock.
The firm has been criticised by some big investors for focusing too much on ethical issues and not enough on driving up profits in recent years. But there have been some changes and hopefully we will see the group work harder for its shareholders in the future.
