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FTSE 100 watch: 2 UK shares I’d buy before the ISA deadline

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The letters ISA (Individual Savings Account) on dice on stacks of gold coins on a white background.
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The deadline to max out this year’s ISA allowance is rapidly approaching. UK share investors have just over a month to make the most of their £20,000 annual investment allowance before it’s lost forever.

I’ve continued to invest in my Stocks and Shares ISA despite the uncertain economic outlook. And there are plenty more UK shares on my shopping list. Here are a couple from the FTSE 100 I’m considering buying before the April 5 deadline.

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A great UK gaming share

The threat of severe regulatory action is never far away for gambling operators. Indeed, the powers-that-be have been taking fresh action in recent weeks that threaten to damage profits at the likes of Entain (LSE: ENT).

But I still think this UK share is an attractive buy because the online betting sector grows at an eye-popping rate. Recent financials from Entain showed online net gaming revenues leapt 27% in 2020. The FTSE 100 firm has restarted its acquisition programme to capitalise on this fast-growing industry too. It recently splashed the cash to enter the Portuguese market and its planned acquisition of Enlabs will give it a strong foothold in Baltic states too.

Private investor buying UK shares at home

City analysts believe that Entain’s earnings will edge 1% higher in 2021 before soaring 38% in 2022. A word of warning, though: this UK share trades on a forward price-to-earnings (P/E) ratio of 26 times. A high rating like this could cause its shares to sharply correct if trading conditions deteriorate.

5%-plus dividend yields

I’d happily add BAE Systems (LSE: BA) to my Stocks and Shares ISA too. Recent financials from the firm underline how strong the trading environment remains. The FTSE 100 engineer said that sales had risen 4% in 2020 to £20.9bn. Order intake meanwhile rose 13% year-on-year, also to £20.9bn. And it painted a bright picture looking ahead, noting that it expected “another year of top-line growth” in 2021 along with additional margin progression and good cash flow.

I don’t think BAE Systems’ key Western customers will be cutting defence spending any time soon given the volatile geopolitical backcloth. Don’t forget that worldwide arms expenditure recently rose at its fastest pace for a decade.

Right now, brokers reckon annual earnings at this UK defence share will rise 10% and 9% in 2021 and 2022 respectively.

These bright estimates leave the FTSE 100 company trading on a low earnings multiple too. Today it carries a price-to-earnings (P/E) ratio of 12 times. In addition, they encourage the number crunchers to predict that BAE Systems will keep paying big dividends too. The yield for 2021 sits at 5.4% for this year and for next year it moves to 5.7%.

But City forecasts are no guarantee of future performance, of course, and problems with the development and production of military hardware are nothing new and could hurt the investment case. 

And while I don’t see any defence cuts on the horizon, in past economic downturns, the amount countries spend on armaments has come under pressure as public purses have taken a whack. That could still come to pass, even though for the time being, defence spending on the whole looks like it will keep on rising.

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Royston Wild 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.

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