News of a Covid-19 vaccine rollout is dominating headlines. Investors are rushing to buy UK shares likely to make a good recovery. The FTSE 100 soared past its opening nine-month high of 6,530 points to breach 6,550 points this morning. This is in part thanks to an OPEC+ deal agreeing to raise production by half a million barrels per day from January. In addition, stock market momentum is building as rumours of a $908bn coronavirus stimulus bill may be about to pass in the US.
In this market, here are three popular UK shares I wonder if I should buy.
Is it worth buying Rolls-Royce shares?
Rolls-Royce (LSE:RR) is a British engineering icon and a crown jewel of UK aerospace engineering. Prior to Covid-19, the company was ramping up efforts to engineer a more carbon-friendly fuel-efficient engine and building an electric aircraft for launch this year. Unfortunately, the pandemic threw a spanner in the works, not only postponing the launch, but halting Rolls-Royce’s earnings. It has now diluted its shares, increased its debt, and is holding on by the skin of its teeth to make it out the other side.
The Rolls-Royce share price has witnessed extreme volatility this year. In fact, since 2 October, the share price has risen 237%. The November rally saw it boosted on the hope of widespread vaccine use and a return to business as usual. However, this is unlikely to be an overnight recovery. I like Rolls-Royce and will be surprised if it doesn’t survive. But I think share price volatility will continue for some time. Investors need to be in it for the long haul.
Will Lloyds shares ever recover?
FTSE 100 bank Lloyds Banking Group (LSE:LLOY) is another potential recovery stock that investors are rushing to snap up. Traditional banking is a sector I steer clear of, and I doubt I’ll be swayed otherwise. The Lloyds share price is down 38% year-to-date. It’s rallying now in response to the vaccine news. However, I think volatility will remain on the cards for the foreseeable future.
If the Bank of England gives the thumbs up to banks and insurers to restart their dividends, then that could bring a flood of value investors back to the stock. I can see it being a popular stock for short-term investors. But I think traditional banks are facing an upward struggle long term. The Lloyds share price has had a dismal year. And with so many job losses continuing to transpire, it could be looking at many defaults in the coming months.
Is it a good time to buy IAG shares?
International Consolidated Airlines Group was one of the hardest hit stocks earlier this year. The IAG share price is down 59% year-to-date but, like Lloyds and Rolls-Royce, has recently been rebounding. The FTSE 100 company has borrowed heavily to see it through these past few months. Although there’s light at the end of the tunnel, its troubles are far from behind it. It’s unlikely that airline passenger numbers will return to pre-pandemic figures until 2023. I think the positive sentiment is already priced in and wouldn’t be rushing to buy IAG shares.
I’m looking for the best UK shares to buy now, and none of these really fit the bill. I prefer a diversified portfolio of growth stocks with stability, a promising future, and little debt.
Kirsteen has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group. 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.