UK share prices continue to struggle to gain traction following last spring’s relief rally. The latest rally at the start of 2021 ran out of steam as fresh fears over the Covid-19 battle surfaced.
There’s some logic behind why broader UK share indices are struggling. The British economy’s dependence on a strong services sector means that it’s being hit particularly cruelly by the Covid-19 crisis. Signs of trade disruption following withdrawal from the European Union are also jangling nerves over corporate profits.
Why UK shares are still great buys
This doesn’t explain why an enormous number of London-listed stocks remain unloved, however. I have a choice to invest in UK shares with non-cyclical operations like utilities, defence contractors and healthcare specialists, for example. I can also splash the cash on companies that will benefit from a prolonged economic downturn. Counter-cyclical stocks like these include fast food firms, insolvency practitioners and discount retailers.
I can also buy UK shares with little or no exposure to the beleaguered British economy. The FTSE 100 alone is packed with firms that generate all or most of their profits on foreign shores. A large number of Footsie firms also report in currencies other than sterling. This allows them to benefit from currency movements when the pound falls.
3 top stocks on my ISA wishlist
I myself have continued buying UK shares for my Stocks and Shares ISA despite the threat of a prolonged downturn. And I’m considering buying the following stocks in February too.
I don’t think they’re just great buys for the here and now though. I’d buy them in the hope of making profits all the way through to 2030.
- I think fast-moving consumer goods (or FMCG) manufacturers like PZ Cussons are perfect picks for times like these. Sales of food and personal care products remain stable during economic upturns and this UK share also has considerable emerging market exposure to drive future profits. It does have extensive operations in Nigeria, however, and this leaves it at the mercy of falling oil prices to some extent.
- Packing manufacturer Mondi’s huge exposure to the FMCG sector provides it with exceptional earnings resilience too. This is even though the FTSE 100 firm could face some headwinds in the form of weakness in broader consumer spending. Soaring e-commerce volumes bode well for boxmakers like this as well, now and over the next 10 years.
- I see GlaxoSmithKline as another brilliant buy for the next decade at least. Yes, medicine makers like this always carry risk as problems with drugs development can cost a fortune in unexpected costs and lost revenues. But I think the essential nature of its products still makes this UK share a top buy for these uncertain times. And soaring healthcare investment in developing regions could supercharge profits at this FTSE 100 stock over the longer term.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline and PZ Cussons. 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.