As the UK enters its third national lockdown in the space of a year, holders of UK shares face a tough choice. Lockdowns have a devastating effect on the economy, and picking stocks in this environment is extremely challenging.
However, here at the Motley Fool, we believe in long-term investing. That means looking past short-term headwinds such as the coronavirus crisis and concentrating on individual businesses’ long-term potential.
And with that in mind, there are two UK shares I’ve been buying ahead of the latest national lockdown.
UK shares for the lockdown
I’ve been using the last lockdown as a guide for finding investments that might do well this time around. While the UK economy recorded its largest slump in history during the first half of last year, some companies actually reported sales growth for the period.
One of these was consumer goods giant Unilever (LSE: ULVR). This business hasn’t been able to escape the impact of the pandemic entirely. Sales of personal grooming products and some food items have declined.
However, these declines have been more than offset by growth in other areas. Sales of cleaning and home cooking products, in particular, have jumped.
As a result, overall sales across the organisation in the first half of last year increased 0.1%. The group then reported underlying sales growth of 4.4% in the third quarter.
Based on these figures, I think it’s highly likely the business will be able to navigate the third national lockdown with ease. Unilever is helped by the fact that more than 50% of the group’s sales come from emerging markets. So its exposure to the UK is actually relatively limited.
Despite these advantages, the stock is trading around 10% below its 2020 high watermark. That suggests to me the investment offers a wide margin of safety. The shares also support a dividend yield of 3.2%. These are some of the reasons I believe this is one of the best UK shares to own in the new national lockdown.
Few UK shares have registered the sort of sales growth seen by Reckitt Benckiser (LSE: RB) over the past 12 months. The maker of top cleaning brands, including Dettol and Cillit Bang, has reported double-digit sales growth across many of its product lines during this period.
For example, due to strong demand for disinfectant products, sales of Dettol-branded sprays, wipes and liquid jumped more than 50% year-on-year in the third quarter of last year.
Based on this growth, City analysts expect the company to report a strong increase in earnings for 2020.
But despite these tailwinds, shares in the company look cheap. They’re trading around 20% below their 2020 high watermark. The stock also offers a 2.6% dividend yield.
This discount, as well as the company’s growth, are reasons why I think this is one of the best UK shares to buy for the year ahead. As the coronavirus crisis continues, I think Reckitt will continue to see a growing demand for its cleaning products.
Rupert Hargreaves owns shares in Reckitt Benckiser and Unilever. The Motley Fool UK has recommended Unilever. 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.