There seems to be an optimistic mood in the air. The past two weeks have seen various pharmaceutical companies announce positive results regarding Covid-19 vaccines. As always, one needs to be careful of hype. The best UK shares right now are not just the ones surrounding Covid-19.
How I judge the best UK shares
My personal choice of the three best UK shares comes down to a few factors. I look for long-term growth potential, and usually a dividend paying stock. I also look for shares that can weather economic storms.
Though I look for companies where short-run ebbs and flows matter less, I am taking note of those I think are oversold right now. Not necessarily the greatest bargains, but opportunities for long-term investment. With this in mind, here are my choice of top-three UK shares.
A prime example of a stock that I think is fundamentally strong regardless of Covid-19, BAE Systems (LSE: BA) has been in my portfolio for years. As such, it is my top choice of what I consider the best UK shares right now.
Firstly, I think that its future prospects are looking even brighter than when I first invested. The UK government recently announced its intention to invest in the defence sector. In the UK, the combat air industry alone accounts for 87% of defence exports. In Germany, the government recently confirmed its order of 38 Typhoo fighters over US rival F-35.
I also like BAE as an income stock. At its current price, the yield is around the 4.6% mark. I think the prospects for BAE are looking very solid indeed.
I have long considered BP (LSE: BP) to be one of the best UK shares, and I recently invested even more. I think BP is oversold because Covid-19 has acted as a catalyst hitting an oversupplied oil market this year. I think these concerns may soon fade though.
BP is transitioning to renewable energy. It may seem ironic, but I think oil majors may be in a strong position to come up with good solutions in this arena. They have money and decades worth of expertise in energy production.
Even though BP cut its dividend this year, at current prices it is yielding around 9%. With this kind of return I think it is one of the best UK shares right now.
My last choice of the best UK shares, I probably consider the riskiest. My concerns surround a potential recession. I think HSBC (LSE: HSBA) is a good opportunity right now, but only if the economy holds out. However, if there is a recession, I think it will just delay the upside, not halt it.
HSBC is undergoing a restructuring that will see it move capital away from its US and European arms, and placed in its most profitable centre – Hong Kong. It is also reducing its headcount from what most experts agree were overstaffed levels.
In the past, it was one of the best dividend payers in the FTSE 100. These are currently suspended, but there is already talk of it coming back. HSBC is perhaps my riskiest choice of the best UK shares right now, but certainly one with great potential.
Karl has shares in BAE Systems, BP and HSBC Holdings. The Motley Fool UK has recommended HSBC Holdings. 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.