If I had £2,000 to invest in UK shares today, I’d feel spoilt for choice. There are loads of amazing opportunities out there right now. The following two stocks have caught my eye for very different reasons. One is dirt-cheap after a share price meltdown, the other is expensive after making investors seriously rich. Which would I buy?
Over-50s specialist Saga (LSE: SAGA) was in freefall well before the stock market crash in March, and Covid-19 has made a bad situation worse. The group’s motor and home insurance business has held up pretty well, but its cruise and travel operations have been hammered.
Saga has just posted a punishing 51.4% fall in first half revenue to £192.4m, with profit before tax down 70% to £15.9m. The losses are mostly down to its travel business, which has been on hold since mid-March. Worryingly, it continues to burn through £6m-£8m a month. Saga hopes to resume travel operations from next April, but ultimately, that is not entirely in its hands.
UK shares are struggling
Like many UK shares, Saga’s problems could offer investors an opportunity. The strategic £100m investment by Sir Roger De Haan and planned £150m capital raise will help keep this ship afloat until better times. I’m impressed by customer loyalty, with 65% of customers retaining their cruise bookings. With the share price now trading at just 1.73 times earnings, Saga is cheap.
Management has a big job on its hands if it wants to turn this crate around. Saga is a strong brand but price-sensitive customers are not as loyal (to any company) these days. You won’t even get a dividend while you wait to see whether the group will succeed. Saga has a long way to go. I’m watching on the sidelines for now.
By contrast, Nottingham-based fantasy miniature figures specialist Games Workshop Group (LSE: GAW) is one of the best-performing UK shares right now. The Warhammer maker has proved adept at building loyal communities, and generating interest both online and through its physical stores. Investors have reaped the rewards.
I’d buy Games Workshop
Over the last five years, this has delivered astonishing share price growth of 1,623%. If you loaded up on its shares during the stock market crash, congratulations. They have now doubled in the last six months.
The Games Workshop share price jumped again last week after it reported sales totalling £90m in the three months to 30 August, up more than 15% from the same period last year. That is despite shop closures during the lockdown. The group also declared a dividend of 50p per share.
I am always wary of recommending UK shares after a fantastic run of success. Games Workshop isn’t cheap, trading at 46 times earnings. However, it is now looking to expand its world into video games, films and television. Its loyal customers are likely to follow.
If it manages that, Games Workshop could maintain its momentum. I’d put all my £2k into this, and skip Saga for now.
Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.