There’s a huge amount of media coverage at the moment for the general election. It’s not surprising, after all, the election’s a big deal. Further, as it’s coming up in less than a month, there’s impetus right now. Even though the stock market hasn’t reacted that much to things so far, here are a couple of UK stocks that I think could do well from it.
Health is wealth
First up is Smith & Nephew (LSE:SN). The global medical technology firm has a wide range of products purchased by both the private and public health sector.
My thinking here is that whichever party wins the election next month, focus will be put on the NHS. Any increase in funding here, or push for better quality goods, will likely be great for business for Smith & Nephew.
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The business reported a solid Q1, with revenue up 2.2% versus the same period last year. It held guidance that’s looking for 5-6% revenue growth for the full year. Remember, this is a firm that has been in operation for 160 years, so the ability to keep growing is impressive.
The stock is down 14% over the past year. Part of this relates to a slowdown in the Chinese market. This also ties in with the fact that the business is global in nature, so I need to acknowledge that even though a boost would come from the UK, it’s not the largest market.
Yet even with that, I still think the stock could do well in the coming year, thanks to election promises.
A defensive play
Another idea is Tesco (LSE:TSCO). This might surprise some, as a supermarket is hardly at the forefront of an election manifesto!
Yet I’m looking at this from a different angle. There’s a chance we end up with a hung parliament, where no party has a majority. In this case, investors would likely try and buy defensive stocks out of concern. Tesco’s a defensive stock.
Further, if we get any curveballs or changes in policy later this year, again investors might be unsure where to allocate their money. In this case, I expect they would likely target defensive stocks, like Tesco.
The reason why Tesco’s in this bucket is due to the relatively stable revenue and constant consumer demand. The nature of the goods and services sold mean they are a staple necessity for many people. As such, regardless of which party’s in power, people should still shop at Tesco.
As a risk, Tesco operates on razor thin profit margins. Even though this is the same across the sector, it does mean that only a slight increase in costs can push the firm from a profit to a loss.
The stock’s up 17% over the past year, double the FTSE 100 average. This positive momentum’s been helped with better financial results now that inflation’s back under control.
I’m considering buying both stocks ahead of the election and I feel they would fit well into a UK investor’s portfolio.
