The outlook for many UK shares remains packed with danger as the public health emergency rumbles on. But I continue to buy British stocks for my Stocks and Shares ISA despite the uncertain economic picture. Here are three I think could make me lots of money in the years ahead.
#1: A bright UK e-retailing share
I think the booming e-commerce sector makes ASOS (LSE: ASC) one of the best UK shares to buy today. This particular fashion retailer offers a broad range of products and brands across many price points. And it trades across Europe and the US, giving it terrific strength through diversification. What’s more, by focusing on the 20-somethings demographic, it’s centred its operations on the most lucrative group in terms of fashion spending.
Now ASOS’s shares don’t come cheap. City analysts reckon the company’s earnings will rise 13% this fiscal year (to August 2021). This leaves it trading on a high forward price-to-earnings (P/E) ratio of 40 times. Such a vertiginous valuation leaves the stock in danger of a share price correction if trading begins to disappoint.
#2: A brickmaking beauty
British house prices continue soaring at a stratospheric pace as demand keeps on exceeding supply. This means housebuilding needs to pick up significantly in the years ahead. And this bodes well for UK brickmaking shares like Forterra (LSE: FORT).
The government has stepped up attempts to improve construction rates in recent years and homebuilding on these shores hit 33-year highs last year. It’s likely an overhaul of the planning system will help construction activity during the 2020s too.
City forecasts expect annual earnings at Forterra to soar 130% in 2021. Consequently, it trades on a forward price-to-earnings growth (PEG) ratio of 0.2. This sub-1 reading suggests the brick manufacturer could be wildly undervalued today.
Bear in mind though that estimates can miss to the downside as well as the upside. And this can pull share prices lower. Investors like me need to remember too that a bumpy economic recovery could damage demand for Forterra’s products in the short-to-medium term.
#3: A streaming great broadcaster
I also like the look of STV Group (LSE: STVG) right now. This is despite the broadcaster facing significant threats from the likes of Netflix and other major streaming companies, which I have to take into account when considering investing in this stock. The business has pumped huge amounts of money and plenty of effort into developing its own video-on-demand (VOD) capabilities. And this is paying off handsomely. Indeed, streaming via its STV Player platform soared 68% in 2020, faster than any other broadcaster’s VOD service. And the platform’s 12.5m streams in January was up 115% from the same month last year.
City analysts currently think STV’s annual earnings will rise 12% in 2021. As a result, the UK share trades on a forward PEG ratio of 0.9. I think this low valuation, coupled with a bulky 4% dividend yield, makes the broadcaster an attractive stock to buy today.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Netflix. The Motley Fool UK has recommended ASOS. 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.