As the British economy continues to recover from the coronavirus crisis, I have been looking for UK shares to add to my portfolio.
Here are five companies I would buy with an investment of £5,000 today.
UK shares to buy
The first stock I would acquire is online broker Hargreaves Lansdown. This company has seen a surge in business during the pandemic. It has also benefited from rising equity markets, which have helped lift the value of client assets, and, as a result, fund management fees.
Of course, if markets were to take a sudden turn for the worse, this trend would reverse. That’s the most considerable risk facing the firm right now. Still, despite this risk, I’d buy the stock for my portfolio of UK shares.
I’d also buy Hays. This recruitment business is a recovery play. Recruiters are usually the first to suffer in an economic downturn. However, they also tend to be the first to recover when the outlook begins to improve.
As the global economy starts to move on from the pandemic, I think this company could reap the benefits. However, the main risk it faces is the potential for another pandemic-driven economic slump, which would delay the recovery.
I’d buy Imperial Brands too for its income potential. At the time of writing, this stock offers a dividend yield of just under 9%. I think this looks attractive in the current interest rate environment.
That being said, like all UK shares, the payout is not guaranteed, and the company could cut its dividend at any moment. Therefore, the dividend income should not be taken for granted.
Still, considering the fact that the payout is covered 1.8 times by earnings per share, I would take that risk.
Demand for office space
Shared office space provider IWG has reported rising demand for its office facilities recently. It seems there’s a growing demand from companies that want a more flexible office solution.
That’s excellent news for IWG, which owns the Regus brand. Based on this demand, management is forecasting a solid couple of years ahead for the business. Based on these projections, I’d buy the stock as a recovery play. The firm’s main challenge now is navigating the recovery while trying to fend off competition from the likes of WeWork. The latter’s deep pockets and expansion plans could prove to be a headache for IWG.
The final stock I’d buy for my portfolio of UK shares is Mitchells & Butlers.
My thesis here is simple. The hospitality business should see sales growth this year as the UK economy re-opens. This growth could provide the company with much-needed cash flow to drive its recovery.
However, this investment might not be suitable for all. Hospitality is a notoriously tricky sector to operate in, and the company has accrued a lot of debt over the past 12 months. These borrowings could hold back its recovery.
We think that when a company’s CEO owns 12.1% of its stock, that’s usually a very good sign.
But with this opportunity it could get even better.
Still only 55 years old, he sees the chance for a new “Uber-style” technology.
And this is not a tiny tech startup full of empty promises.
This extraordinary company is already one of the largest in its industry.
Last year, revenues hit a whopping £1.132 billion.
The board recently announced a 10% dividend hike.
And it has been a superb Motley Fool income pick for 9 years running!
But even so, we believe there could still be huge upside ahead.
Clearly, this company’s founder and CEO agrees.
Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Hargreaves Lansdown and Imperial Brands. 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.