I don’t care about the worsening economic outlook for 2021. For my money, buying UK shares remains a brilliant idea right now.
Hundreds of Stocks and Shares ISA investors became millionaires during the bull market of the 2010s. They watched the UK shares they bought in the depths of the banking crisis soar in value in the following decade. It showed how those with a patient approach to stock investing can make a fortune.
Inspired by their successes, I’ve continued buying for my own ISA following the 2020 crash. Here’s two UK shares I think could do wonders for my portfolio:
A UK share on my ISA watchlist
I believe that getting exposure to renewable energy is a brilliant idea as the climate crisis worsens. Data from electricity industry think tank Ember shows just how strongly the use of wind, solar, and hydroelectric sources is ballooning. It says that renewable usage in Britain accounted for 42% of all power generated last year. This compares with the 41% that was generated by fossil fuels.
I think the use of green energy sources is only going to get stronger and stronger too. And I also think this will benefit stocks like Greencoat UK Wind (LSE: UKW), a company that invests in wind farms across all four countries of the UK. Current legislation demands a 100% reduction in greenhouse gas net emissions by 2050 relative to their 1990 levels.
Right now, Greencoat UK Wind trades on an elevated price-to-earnings (P/E) ratio of 45 times. It’s important to note that such a high multiple leave the share in danger of a severe price correction if the company’s business performance turns out to be disappointing.
On the plus side, though, at current prices the utilities giant also carries a 5.1% dividend yield for 2021. This smashes the broader 3.1% forward average for the broader UK share space to smithereens. I don’t own Greencoat in my ISA currently but I’m thinking seriously about piling in soon.
Banking on e-commerce
I think having exposure to e-commerce is another sound investment idea in the 2020s. I’ve gotten in on the act by investing in Tritax Big Box REIT and Clipper Logistics in my Stocks and Shares ISA. Trade at these UK shares is booming as increasing online shopping volumes bolster demand for their warehousing and distribution services.
I also own shares in DS Smith (LSE: SMDS) to try to profit from e-commerce by 2030 too. This business supplies the sort of packing that Internet retailers use to get their products to their customers. Its industry-leading record of innovation means that the FTSE 100 firm’s products can be used across a variety of retail sectors, too. The company may see earnings come under pressure should a slow economic recovery weigh on broader consumer spending levels, however.
Today this UK share trades on a forward P/E ratio of around 18 times. This is above the FTSE 100 historical average of 15 times, sure. But I think the immense profits opportunities that the soaring e-commerce market will present merit this blue chip’s current valuation.
Royston Wild owns shares of Clipper Logistics, DS Smith, and Tritax Big Box REIT. The Motley Fool UK has recommended Clipper Logistics, DS Smith, Greencoat UK Wind, and Tritax Big Box REIT. 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.