How I’d invest £1,000 in UK shares before the general election

Is this a good time to buy UK shares? Stephen Wright thinks there are opportunities for investors looking to buy stocks for long-term returns. 

| More on:

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.

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.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

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.

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.

Stephen Wright has positions in Primary Health Properties Plc. The Motley Fool UK has recommended Primary Health Properties 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 Articles

Investing Articles

FTSE 100 or S&P 500: where should I invest?

UK investors are often drawn to the high growth of US stocks. But there are pros and cons to be…

Read more »

Investing Articles

2 of the best US growth and dividend stocks to consider!

These heavyweight US stocks have been delivering tasty investor returns for decades. Here's why they could remain great picks for…

Read more »

Investing Articles

I reckon these 2 penny shares are hidden gems worth a closer look!

Some penny shares are well-known, whereas many others go under the radar, but that doesn’t necessarily mean they aren’t potentially…

Read more »

Investing Articles

Just released: our 3 best dividend-focused stocks to buy before August [PREMIUM PICKS]

Our goal here is to highlight some of our past recommendations that we think are of particular interest today, due…

Read more »

Investing Articles

2 FTSE 100 shares with blockbuster yields investors should consider buying

Our writer has noticed that these FTSE 100 shares offer mammoth dividend yields, and reckons investors should take a closer…

Read more »

Stack of British pound coins falling on list of share prices
Investing Articles

Down 36% and yielding 7.8%, is this FTSE 250 share a bargain?

Christopher Ruane looks at a FTSE 250 share with a sizeable dividend yield and a recent record of dividend growth.…

Read more »

Investing Articles

Is Barclays one of the FTSE 100’s best bargain stocks?

Right now, Barclays' shares are cheaper than those of FTSE 100 rival stocks Lloyds and NatWest. So should I buy…

Read more »

Happy young female stock-picker in a cafe
Investing Articles

Is a takeover offer about to boost the Rentokil stock price, and should I buy?

The Rentokil share price is up 10% on takeover rumours. Is it a stock to buy or one to be…

Read more »