I’ve been looking for UK shares to buy for my portfolio recently. I think this is the best strategy to profit as the UK economy pulls itself out of the coronavirus crisis.
Here are three companies I have been reviewing as a way to invest in this theme.
UK shares to buy
At the top of my list of UK shares to buy is AutoTrader (LSE: AUTO). The online car sales portal should benefit from two tailwinds as we advance.
First of all, demand for second-hand vehicles has been rising recently. Rising demand has pushed prices higher. Secondly, car sales overall tend to increase in periods of economic growth. Therefore, AutoTrader should see an increase in activity as the economy returns to growth over the next few quarters.
I think both of these tailwinds should help the company increase sales and profits, which is why I would buy the stock for my portfolio today.
The main risks and challenges the business faces are competition and the potential for another economic downturn which could dent demand.
On the competition front, several other second-hand car retailers such as Cazoo emerged in recent years, making life harder for the incumbent.
Rats, mice, and other pests have always been a problem for the world. As such, there’s always been a level of demand for pest control services. That’s why Rentokil (LSE: RTO) also features in my list of the three UK shares to buy.
Analysts believe that a warming global climate is helping vermin breed, which suggests demand for the company’s services will expand in the years ahead. At the same time, Rentokil is relatively acquisitive. It has a long track record of buying growth through acquisitions.
These are the two main reasons I think the stock could be a great growth addition to my portfolio. That said, I will be keeping an eye on Rentokil’s acquisition programme.
Companies that expand too fast with acquisitions can end up damaging their reputation and balance sheets through overexpansion. This is the biggest challenge facing the business today.
The UK housing market is on a tear. I think that bodes well for one of the country’s largest tech firms, Rightmove (LSE: RMV). That’s why this corporation is the final pick on my list of UK shares to buy.
Rightmove is a great business. It has low expenses, and as one of the most used websites in the UK, estate agents have to use its services. That means the company has a lot of flexibility when it comes to pricing. In theory, it could charge whatever it wants.
With this being the case, there’s no surprise the company has some of the highest profit margins in the FTSE 100. In 2019 the group reported an operating profit margin of 74%, although this fell to 66% last year.
As long as the company maintains its competitive advantage in the market, I think it is one of the best UK shares to buy. That’s why I would buy the stock for my portfolio today.
One challenge it faces is competition. There are several other competitors in the market who are all trying to grab market share. If Rightmove loses its competitive advantage, its profit margins and profits may slump.
Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Auto Trader and Rightmove. 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.