I don’t have unlimited funds I can use to buy UK shares. But here are two I’d like to buy when I have spare cash to invest.
Kainos Group
Artificial intelligence (AI) looks set to be the biggest technological advance of the next decade. This new frontier is still in its early stages but the recent buzz around Open AI’s chatbot ChatGPT underlines its huge potential, and the possibility for UK share investors to make some decent cash.
In a recent blogpost Microsoft co-founder Bill Gates commented of AI:
“It will change the way people work, learn, travel, get health care, and communicate with each other. Entire industries will reorient around it. Businesses will distinguish themselves by how well they use it.”
He went on to describe the development of AI as being “as fundamental as the creation of the microprocessor, the personal computer, the Internet, and the mobile phone.” That’s quite a big statement, I’m sure you’ll agree.
Kainos Group (LSE:KNOS) is a UK share I’m considering buying to capitalise on this tech revolution. It provides a range of AI-driven services including machine learning, fraud detection, document reviewing and fault detection.
The business supplies IT solutions to the public and commercial sectors. And thanks to strong demand for its AI and cloud-based technology, revenues at its Digital Services division soared 17% in the six months to September.
Kainos is about more than just AI though. It is also a major partner of US software giant Workday, an arrangement which delivers strong revenues in its own right. Such diversification gives growth an extra boost while also reducing risk.
Today, the firm trades on a forward price-to-earnings (P/E) ratio of 31.4 times. Firms with high valuations like this are especially vulnerable to share price slumps if newsflow suddenly worsens.
Yet, on balance, I believe the potential long-term rewards associated with owning Kainos shares offset this risk.
Grainger
The operations of residential landlord Grainger (LSE:GRI) couldn’t be more different to those of Kainos. But this is a UK share I’m also expecting to deliver robust profits growth over the next 10 years.
This is because private rents in Britain appear on course to continue soaring. Latest Office for National Statistics data showed rent inflation speed to 4.7% in the 12 months to February. This was the highest rate of growth for seven years.
It’s my opinion that rents will keep rising at a rapid pace for the foreseeable future. Weak housebuilding activity and an exodus of buy-to-let investors — combined with steady growth in the UK population — means a shortage of rental properties will persist.
As the country’s largest-listed residential landlord Grainger is well-placed to exploit this theme. And it has a £1.8bn development pipeline to help it maximise rental income.
Profits here may suffer in the short term due to high building cost inflation. But solid rental growth means earnings here could still impress.
