The best UK shares to buy now are likely to be those companies capable of surviving a challenging period for the economy. That’s so they can capitalise on a likely long-term recovery.
As such, businesses with solid balance sheets and strong market positions could emerge from the current economic crisis in a better position relative to their peers. Where they trade on low valuations, they may be able to deliver high returns in a likely stock market recovery.
Over time, such companies may turn a modest initial investment into a surprisingly large sum. They may even allow an investor to make a million.
The best UK shares are set to survive short-term challenges
Even the very best UK shares are likely to experience some form of disruption in the coming months. Risks such as coronavirus and political uncertainty may weigh on a wide range of sectors. Therefore, it’s crucial an investor’s holdings have the means to cope with a period of lower sales and profitability.
This will enable them to enjoy improving operating conditions as the UK and world economies gradually recover from present challenges.
As such, companies including WPP and Barratt could prove to be attractive. They’ve been able to improve their balance sheet strength over recent years. This should mean they’re not just able to survive short-term challenges. But also develop their market positions to generate higher returns as the economy recovers.
WPP has also streamlined its business model so it’s more flexible than previously. This may help it to adapt to changing customer demands in an increasingly technology-focused economy. Meanwhile, Barratt’s large land bank and high customer satisfaction ratings could make it one of the best UK shares to buy now.
UK stocks trading at cheap prices
Clearly, the best UK shares to buy now are likely to offer wide margins of safety. They could produce impressive share price growth because they’re undervalued at the present time. Indeed, buying undervalued shares has historically been successful. Investors who bought cheap shares after previous crises have enjoyed strong recoveries in their aftermath.
Therefore, stocks such as Tesco and HSBC could prove to be attractive long-term purchases. Tesco has a price-to-earnings growth (PEG) ratio of just 0.5, while HSBC’s PEG ratio is 0.2. These figures suggest investors haven’t yet factored in the growth potential offered by the two companies as the economy picks up following the coronavirus pandemic.
While the best UK shares can outperform the stock market, even obtaining the same return as the FTSE 100 could produce a portfolio valued in excess of a million. For example, a £100,000 investment, or £750 per month, would be worth £1m within 30 years if it attains the same 8% annual return as the FTSE 100 has done in the past.
However, with many high-quality companies trading at cheap prices, there may be opportunities to obtain a seven-figure portfolio at an even faster pace.
Peter Stephens owns shares of Barratt Developments, HSBC Holdings, Tesco, and WPP. The Motley Fool UK has recommended HSBC Holdings and Tesco. 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.