2 UK stocks that could do well out of the general election

Jon Smith runs the rule over two UK stocks that may benefit from higher spending on healthcare, consumer staples and any election uncertainty.

| More on:
Rainbow foil balloon of the number two on pink background

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

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.

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.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Jon Smith has no position in any of the shares mentioned. The Motley Fool UK has recommended Smith & Nephew Plc and Tesco Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing For Beginners

British union jack flag and Parliament house at city of Westminster in the background
Investing Articles

2 of the widest moats in the FTSE 100

A durable competitive advantage is key to a good investment. And Stephen Wright thinks a couple of FTSE 100 firms…

Read more »

Investing Articles

Will the 5.6% BT Group dividend yield grow in 2024?

Zaven Boyrazian explores whether BT Group can continue hiking its dividend and if the telecoms giant belongs in his income…

Read more »

Investing Articles

FTSE 100’s near a 52-week high, but this stock’s still dirt cheap!

The FTSE 100's on the rise, but not all stocks have been so fortunate. Here’s one company that got left…

Read more »

Investing Articles

£3,000 of savings? Here’s how I’d use that to start buying shares this July

Our writer uses his investment experience to consider what he would do today if he wanted to start buying shares…

Read more »

Investing Articles

Would I be crazy to buy Lloyds shares at a 52-week high?

Lloyds shares are up 30% over the last 12 months. But at a P/E ratio of 8, is it too…

Read more »

Businessman use electronic pen writing rising colorful graph from 2023 to 2024 year of business planning and stock investment growth concept.
Investing Articles

History suggests the FTSE 100 may double from where it is now

The FTSE 100 overall is buoyant, but this single stock has the potential to be a better buy now its…

Read more »

Fans of Warren Buffett taking his photo
Investing For Beginners

How to invest £2k the Warren Buffett way

Warren Buffett's made a fortune by investing his money in a very specific way. Here’s how to invest a few…

Read more »

Investing Articles

Here’s how to target £500k starting with a small Stocks and Shares ISA in 2024

Zaven Boyrazian explores a simple long-term investment strategy that could turn £5k into £500k by leveraging the power of a…

Read more »