Overall, UK shares have held up relatively well ahead of the upcoming general election. But there are still some terrific opportunities for investors looking for stocks to buy.
The best businesses can do well regardless of the political landscape. Since I think the UK has plenty of these, I’d look to invest today, rather than waiting for the outcome of the election.
Election investing
The odds of a Labour majority are currently 1:33. That’s a lot shorter than the odds on the current favourite for the US election – Donald Trump – which are priced at 8:13.
I’m not taking a view about how desirable either outcome would be. But that’s why UK stocks have been holding up well recently.
In general, the stock market isn’t that bothered about who will win which election. What it cares much more about is having clarity about the outcome.
It’s the same with most macroeconomic issues. It’s much easier for investors to deal with predictable 5% interest rates than with uncertainty over whether they will be 2% or 4%.
That’s why UK share prices have been less volatile than their US counterparts over the last few weeks. But there are still stocks that I’m looking to buy at today’s prices.
Rentokil Initial
The involvement of activist investor Nelson Peltz at Rentokil Initial (LSE:RTO) has sent the share price up recently. And that’s made it more difficult to buy the stock than it was before.
I’ve had to reconsider my approach to the stock, but I’ve come to the conclusion it still looks like a decent investment. I think company’s strengths outweigh the additional risk.
Rentokil has a dominant position in an industry that is – unfortunately – steadily growing. And it’s working hard to consolidate that position, which is a good sign for the long term.
The company has some debt on its balance sheet to work off after a big acquisition a couple of years ago. But when it does, I think it will be in a terrific position for long-term investors.
Primary Health Properties
Waiting times for GP appointments is a key election issue, but everybody seems to be committed to reducing them. That’s good news for Primary Health Properties (LSE:PHP).
The company is a real estate investment trust (REIT) that owns a portfolio of GP surgeries. More doctors probably means higher demand for its buildings, which is a good thing.
This is another company where debt is a risk. As a REIT, it isn’t able to manage its debt in the way that Rentokil does, so if interest rates don’t fall it might have to issue more shares.
Right now, the stock has a 6.5% dividend yield. Even if that gets cut in half – which I think is the absolute worst that could happen – there’s still a decent passive income return on offer.
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How I’d invest £1,000
Rentokil Initial and Primary Health Properties both come with risks. But spreading a £1,000 investment between the two companies would help limit the overall effect on my portfolio.
I think both companies operate in industries with good long-term characteristics. So whatever happens in the election, I expect both stocks to turn out to be good investments.
