Are these the best UK shares to buy now?

With both the FTSE 100 and FTSE 250 down this year, this could be one of the best opportunities to buy UK shares. I think these are two of the best.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

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.

The Covid-19 pandemic has damaged share prices around the world. The FTSE 100 has dropped by 18% year-to-date. The smaller UK index, the FTSE 250, has had a similar trajectory, falling by 21% year-to-date. I believe this has opened up one of the best opportunities to buy UK shares for years.

Of course, with falling share prices, it’s often difficult to determine whether something is cheap for a reason. I think it’s best to be cautious. With that in mind, here are two shares I’d buy and hold for the long term.

The best UK share to buy now?

I love consumable shares, especially when a business sells low-value items that customers always need. Unilever (LSE: ULVR) is probably the best UK consumable company right now, with brands in its portfolio like Marmite, Ben & Jerry’s, and Lynx. Even in times of economic hardship, I think many of Unilever’s products will make it into customers’ baskets.

Unilever’s share price is roughly level year-to-date. This makes its price-to-earnings ratio just 18. I think this could signal that this is one of the best opportunities to buy shares in Unilever at a bargain price.

With Unilever’s strong list of products, I expect brand loyalty from its customers. In the future, I think this will enable Unilever to nudge up prices to further improve margins.

In turbulent times such as these, I think people will seek out shares in companies like Unilever, due to the dependable revenue and profitability the company normally generates.

Diageo 

For similar reasons to Unilever, I think that Diageo (LSE: DGE) shares are currently among the best in the UK. The company’s share price has fallen by 11% year-to-date. Its price-to-earnings ratio is slightly higher than Unilever’s, at 22. With that in mind, the shares can’t be classed as cheap, but I don’t mind paying a premium for a slice of a quality company.

The multinational drinks giant has been hit heavily by the various lockdowns implemented around the world. Unsurprisingly, the closure of bars, restaurants, and hotels has impacted revenues.

However, it’s not all bad news for Diageo. We are slowly seeing a return back to normal, with pubs and restaurants reopening. It might take a while for consumer confidence to return. When it does, I imagine they’ll be returning to their favourite drinks and companies like Diageo will benefit.

The company has a strong portfolio of beverages, including Guinness, Smirnoff, Johnnie Walker, and Baileys. This should ensure that the company has a drink when palates change.

The other thing that makes Diageo one of the best UK shares to buy is its generous dividend yield, which is currently about 2.5%. As my fellow-Fool Edward Sheldon notes, Diageo has notched up its dividend for 21 consecutive years. Edward thinks Diageo is unlikely to slash its dividend any time soon. I’m inclined to agree with him.

With pubs, restaurants and bars reopening, I think now is the time to buy Diageo shares and hold for the long term.

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.

T Sligo has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo and Unilever. 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

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »