There are two UK shares I’d consider adding to my holdings, if I had some spare cash, ahead of any impending bull market.
As a reminder, a bull market is when the price and performance of financial securities is on the up for a prolonged period of time. Although the term is most commonly used to describe stocks and shares, it covers many other aspects of the financial markets including real estate, currencies, bonds, and more.
Searching for property
The first stock is Rightmove (LSE: RMV), which is the largest online property portal and possesses over 80% of the market share in the UK. It makes money by charging estate agents subscription fees to list their properties on its platform.
Rightmove’s commanding market share is a major positive. Next, it currently pays a dividend, which would boost my passive income. Currently offering a yield of 1.5%, I could see this growing during a bull market. I am aware that dividends are not guaranteed and can be cancelled at the discretion of the business to conserve cash.
Moving on, Rightmove’s most recent annual report was impressive. For the period ended 31 December 2022, it reported that revenue rose by almost 10% to £332.6m. In addition to this, it increased its dividend and underlying earnings per share also increased by nearly 10%.
The current macroeconomic issues — including rising interest rates that are making mortgages much more expensive — could impact demand for homes. This could lead to demand for Rightmove’s platform dropping, therefore potentially impacting performance and returns.
The counter argument to the aforementioned risk is that there is a major shortage of housing in the UK. This tells me that as homes continue to be built, real estate agents and housebuilders will need to utilise platforms like Rightmove to advertise said properties. This could boost performance and returns in the longer term.
Catering services
The second stock I like is Compass Group (LSE: CPG), which is one of the largest catering businesses in the world with operations in over 50 countries. It provides on-site catering for businesses, schools, hospitals, stadiums and more.
Like many other UK shares, the pandemic impacted Compass detrimentally as gatherings were restricted for a long period of time.
Compass Group has recovered well since lockdowns are a thing of the past. In fact, upon reviewing its performance, I can see that revenue has surpassed pre-pandemic levels. This is excellent news for the business and shareholders alike.
Compass has reinstated a dividend and currently possesses a yield of 1.7%. With future growth initiatives a focal point of the company’s strategy moving forward, I believe it’s likely to increase.
Despite a bullish outlook for Compass, there are risks involved too. To start with, rising costs due to soaring inflation could squeeze profit margins. Furthermore, another pandemic could result in further lockdowns, which could impact demand, performance and returns.
Overall, I am buoyed by Compass’ return to profitability and the way in which it has bounced back from its pandemic woes. Furthermore, one of its competitive advantages — like Rightmove — is its size, reach, and profile, which can boost performance and returns.
