I heard on the radio Boris Johnson reckons a second wave of Covid-19 is beginning to bubble up abroad. So, with all the uncertainty in the air, what are the best UK shares to buy now?
Firstly, I don’t think the possibility of a second dip in the stock market in 2020 is anything to fear. It may happen, but if it does I’d view it as an opportunity to buy cheaper shares. It’s a bit like going shopping when the sales are on. It makes sense to load up with washing machines, clothes, fast-food and everything else when they are cheaper than usual. And it makes sense to buy cheaper shares too.
Hunting for the best UK shares to buy now
But shares usually fall when underlying business operations suffer a setback. Or when the stock market thinks trouble is brewing ahead. And that can be off-putting. We usually must go against the grain of our emotions when it comes to buying cheap shares. The threat of another wave of coronavirus, for example, makes me feel like selling shares. But investing during uncertain times can often lead to the most lucrative purchases.
That’s one of the basics of Warren Buffett’s strategy. He’s known for loading up with stocks when others are cautious about the stock market. Why? Because he can often buy shares in good-quality underlying businesses when they are selling cheaply. The second part of the strategy is to hold on to those shares for a long time. Over years, operations can recover, valuations can inflate, and share prices can rise. It’s made billions for him.
So I’d buy shares right now. And if the stock market falls again, I’d buy more shares. But I’d emphasise the quality of the underlying business rather than the cheapest price. Indeed, if you look in the dustbin of the very cheapest shares on the market, you’ll probably find a lot of rubbish.
Shares I’d pick right now
Right now, I like the look of several shares with defensive, cash-generating operations. Those companies have businesses that tend to be less affected by the ups and downs of the general economy. For example, FTSE 250 fast-moving consumer goods operator PZ Cussons looks like a decent recovery play. It’s under the control of a new, experienced chief executive who looks set to reverse the firm’s recent poor performance.
And Premier Foods is experiencing a brand renaissance and higher earnings under a refreshed management team. The firm is sorting out its previous debt problems and the future looks bright for the business and its shares.
Meanwhile, within the theme of drinks, both alcoholic and non-alcoholic, I’d focus on Diageo, Britvic and Nichols right now. And in healthcare, I reckon the long-term opportunity is as strong as ever for AstraZeneca,GlaxoSmithKline and Smith & Nephew.
Those are just a few shares I’d consider to be high-quality with reasonable valuations. Good luck in your search for others.
Kevin Godbold owns shares in PZ Cussons. The Motley Fool UK has recommended Britvic, Diageo, GlaxoSmithKline, Nichols, and PZ Cussons. 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.