There are more than 1,500 UK shares listed on the London Stock Exchange, making investors spoilt for choice when it comes to finding exciting growth and income opportunities.
However, having lots of options also makes it harder to pinpoint exactly which stocks are good investments. After all, not every share is destined for greatness. And one tactic that investors often use is to look at which companies are being bought the most by other investors.
Right now, three of the most popular buys over the last 30 days are Legal & General (LSE:LGEN), BP (LSE:BP.) and Barclays (LSE:BARC). At least, that’s what the latest buy and sell data from AJ Bell reveals.
So what’s behind this surge in interest? And are these UK shares worth considering right now for those with £500 to spare?
Digging deeper
On the surface, these businesses don’t seem to share a lot of overlap. After all, they each operate in distinctly different sectors of insurance, energy and banking. Yet at the same time, they each share some desirable traits that UK investors often hunt for.
All three stocks are currently trading at reasonable valuations, offer robust dividend yields, and have been delivering improving fundamentals over the last 12 months.
| Company | Forward Price-to-Earnings Ratio | Dividend Yield |
| Legal & General | 10.6 | 9.1% |
| BP | 12.3 | 5.8% |
| Barclays | 7.5 | 2.3% |
Inspecting each business more closely:
- Legal & General’s targeting a substantial expansion of operating cash flow generation over the next three years, supporting its generous dividend
- BP’s already seeing a bounce-back in performance following its strategic pivot back towards fossil fuels
- Barclays is reaping the rewards of its smart financial hedging against interest rate changes, granting it one of the highest lending margins among its peers
Combining this with generally bullish sentiment from institutional investors, all projecting respectable share price growth over the next 12 months, it’s not difficult to understand the rising popularity of these businesses.
What to watch?
So far, these UK shares seem to offer a sound investment case. However, in each instance, there are still some critical weak spots that investors need to monitor carefully.
Legal & General’s dividend coverage is tight. And with the business sensitive to economic conditions, a downturn could hamper demand for its life insurance and asset management services, resulting in cash flow compression. Depending on the severity, that could also mean the lofty dividend may get placed on the chopping block.
Barclays has similar macroeconomic exposure. While the group has a large investment banking arm, the bank’s still sensitive to swings in the UK property market. Higher economic pressures combined with ongoing home affordability issues could result in a significant slowdown in its mortgage lending activities.
Lastly, for BP, shifting back to oil & gas has helped reduce its exposure to uncertain renewable energy projects. But it’s also amplified the group’s exposure to fluctuating oil & gas prices. And any sudden downturn could result in this strategic shift backfiring.
The bottom line
With £500, investors can potentially snap up shares in all three of these UK companies. However, it’s essential to closely examine both the risks and potential rewards, these stocks offer. Personally, while each has its merits, I think investors can consider building significantly more wealth from other hidden opportunities. I’ve got my eye on some right now.
