I have been looking at the market lately for pockets of value. With a spare £5,000, this would be my list of 5 UK shares to buy now for my portfolio.
UK shares to buy now: my list
On my list of UK shares to buy now for my portfolio, I include Judges Scientific.
The company is below many investors’ radar. But its disciplined approach to buying niche scientific makers with pricing power attracts me. By letting these companies operate largely independently, Judges can reap the benefits without having to get bogged down in the intricate details.
The shares are up 24% over the past 12 months.
I think the business model is attractive and would consider buying Judges at the current price. But risks include a turndown in demand due to less research activity in universities and labs during lockdowns.
When looking for UK shares to buy now, I would definitely consider British American Tobacco. Its record of annual dividend rises over several decades does not guarantee future dividends. But I do like the 7.5% yield. The collection of brands and global exposure mean that this is not just a play on a certain market. The company is aggressively expanding into non-cigarette revenue streams such as heated tobacco.
BAT’s large debt pile is a risk. Repaying that debt reduces free cash flow the company could otherwise use for dividends.
Morrisons may not seem a very exciting share – but that forms part of its appeal for me. The company’s estate of supermarkets provides broad customer reach. It is building its online business too. The group’s wholesale division is also growing strongly. In its first quarter, the wholesale business showed like-for-like growth of 21% compared to last year.
But the growth of online retail adds to risks, including lower profit margins for home deliveries hurting overall profitability.
I am currently considering opening a position in Renalytix AI. It has put on 196% in the past year. So why do I still regard them as UK shares to buy now?
The company has a proprietary artificial intelligence kidney diagnostic tool. It has not been on the market long, but so far looks promising to me. The company signed a deal with the US government that could lead to substantial sales over the coming decade.
I see a strong story in the Renalytix product. But this is still a fairly early stage company. Risks include competitors launching similar products on the market, which could hurt profit margins.
Recovery play among my UK shares to buy now
Defence contractor Babcock saw its shares jump last month when the company ruled out using a rights issue to prop up its balance sheet. That is positive for shareholders as it removes the risk of dilution, for now.
But Babcock is still far below its former highs. It has lost 23% over the past year alone. I recognise risks. For example, a shift to new accounting methodology is expected to lop £30m off the company’s operating profit annually.
But with its key role in defence contracting I expect Babcock to continue to capitalise on its deep relationships and strong order book. Results are due later this month. If the results click with the City, that could be good news for the Babcock share price.
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christopherruane owns shares of Babcock International Group and British American Tobacco. The Motley Fool UK has recommended Judges Scientific and Morrisons. 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.