I’ve been looking for UK shares to buy after the recent stock market rally. Two companies in particular have attracted my attention. I believe these could be great ways for me to invest in the UK economic recovery over the next few months and years.
UK shares to buy
Whitbread (LSE: WTB) has been impacted more than most other businesses throughout the pandemic. The Premier Inn brand owner has faced the daunting reality of having most of its operations closed throughout the past 12 months.
The impact can be seen on its revenues. For its last financial year, the group reported revenues of just under £2.1bn. For the current financial year, analysts are projecting sales of just £648m. That’s a 70% decline year-on-year.
Further, the group is expected to report a loss of £530m, compared to a profit of £218m in the prior-year period — a swing of £748m.
I think these figures clearly illustrate the challenges facing the group. Whitbread has bled money over the past 12 months, and it could be some time before this trend changes, especially if coronavirus restrictions last beyond the government’s current roadmap.
However, I believe this is one of the best UK shares to buy because of its recovery potential. Estimates vary, but economists believe UK consumers have saved over £150bn throughout the crisis. When the economy opens up again, they may rush to spend those savings. Indeed, there have already been reports that some holiday firms are seeing a significant increase in the average cost of holidays booked compared to before the pandemic.
This implies Whitbread may grow back stronger. Of course, this isn’t guaranteed, but I think the group has tremendous potential as a recovery play.
That’s why I’d buy the stock for my portfolio today.
Another business that sits on my list of the best UK shares to buy today is engineering group Smiths (LSE: SMIN). This is an economic recovery play, but it doesn’t sit in the same bucket as companies such as Whitbread.
Smiths is one of the world’s largest suppliers of medical products.
Over the past year, as the global medical system has been concentrating on coronavirus, routine operations have been postponed. Smiths’ engineering divisions have also been impacted. As a result, group revenues for the three months ended 31 October were down 2%.
As the world recovers from the pandemic, I think the demand for services from engineering groups such as Smiths will rebound. That’s why I’d buy the stock for my portfolio today.
But that’s not to say the business doesn’t face challenges. Smiths has a solid reputation worldwide as an engineer, but this can’t be taken for granted. If the group skimps on quality or research and development, consumers make quickly grab market share. That may have a significant impact on revenue growth.
So think it would be sensible to keep an eye on these potential challenges as we advance.
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Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.