As 2020 draws to a close, it is natural for investors to look back over the year. It has been a tough one for most, and Covid-19 has dominated markets and news headlines alike. Looking forward to 2021 however, I think there are opportunities to be had. This is why I am looking at my choice of two UK shares to pick up this side of the New Year.
My criteria for considering these my top UK shares
Here I am considering stronger, well branded firms in the FTSE 100, which in the current climate gives me the risk/reward profile I am looking for. With this in mind, here are my top two UK shares to buy today.
To a certain extent, AstraZeneca (SLE: AZN) has moved into my number one choice of UK shares to buy right now. Naturally, it is seeing a lot of interest as a result of its Covid-19 vaccine. For me, though, this only adds to the appeal of the share as an investment.
It seems unlikely the vaccine will really help boost the company’s profits in the short term. In the long run, however, an increased interest in pandemics and vaccines should see Astra get significant government support.
I also think now may be the perfect time to get the company at a bargain price. The stock is seeing pressure following the announcement of AstraZeneca’s $39bn acquisition of US biotech firm Alexion. Alexion will be adding significantly to Astra’s portfolio, and also brings in a nice positive cash flow. I think the acquisition will be positive long term.
I have long been a fan of BP (LSE: BP). In the past, its appeal was mainly as a strong income share, but at the moment it also offers potential growth. As with the other oil majors, Covid-19 and travel bans have been weighing on the shares price this year.
This is the classic relationship between oil producers and the price of crude. However as oil prices start to recover, so too will related stocks. I think BP could be the perfect pick of UK shares right now.
I am of the opinion that Covid-19 acted more as a catalyst for the oil price slump. The straw that broke the camel’s back, so to speak, in a market that was already worried. The crude market does have some fundamental weaknesses regardless of Covid-19 – chiefly a large amount of spare capacity. However Russia and OPEC, both of whom dominate oil production, are likely to keep output low to artificially bolster prices.
I doubt 2021 will see oil prices sky rocket, but BP doesn’t need them to. Combined with the potential increase in its dividend if and when that comes forward, for me this makes BP look like a decent UK share to pick up right now.
Karl has shares in AstraZeneca and BP. 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.