As the global economy starts to rebuild after the coronavirus crisis, I’ve been looking for UK shares to buy for my portfolio that may benefit from the recovery.
There’s one blue-chip business that stands out to me as one of the best ways to invest not only in the global economic recovery but in one of the world’s fastest-growing economies as well.
UK shares to buy for growth
Prudential (LSE: PRU) is one of the most respected and storied UK insurers. Or it was before the group spun off its UK business under the M&G brand.
Today, Prudential’s main divisions are based in the US and Asia (although it’s still headquartered in London).
Management is planning to carve out the US business shortly. So Prudential will be an Asia-focused enterprise when this transaction’s complete, with the bulk of its earnings coming from China and Hong Kong.
Business in these regions is growing rapidly. Not only is the company benefiting from China’s economic growth, but the country is also relatively financially underdeveloped. The number of individuals who have life insurance and private pensions is still relatively small compared to the UK. This presents a tremendous opportunity.
And it’s not just China and Hong Kong where Prudential has scope to grow. It has a footprint across Asia. All of these economies have similar tailwinds. They’re benefiting from young, growing populations and increasing wealth.
When Prudential has completed its break-up plan, it will have shed the slow-growing UK and US business. This is why I believe the company is one of the best UK shares to buy right now. After divesting these low-growth divisions, management can focus on expansion across Asia. In this financially underdeveloped region, the sky’s the limit for the corporation.
Risks and challenges
Unfortunately, the company is one of many entities trying to attract custom across Asia. This could make it harder for the business to achieve impressive growth rates. Competition is fierce and only increasing. In addition, China’s population growth is also slowing, which may weigh on growth over the next few decades.
Prudential may also face regulatory challenges and, after spinning off its mature US and UK businesses, cash flows could be lower. The company has already cut its dividend to prepare for an environment where cash flow is softer and more money must be reinvested for growth.
Despite these risks and challenges, I believe Prudential is one of the best UK shares to buy right now. As such, I’d buy the stock for my portfolio as a buy-and-hold investment.
As a way to invest in Asia’s fastest-growing economies and expanding middle class, I think the company is one of the best options for UK investors who may lack access to international equities.
Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Prudential. 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.