3 UK shares to buy

This Fool outlines three UK shares he’s looking to acquire based on their growth prospects in the next few years.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Looking at the latest economic data, I think the UK economy is set for a strong recovery this year. With that being the case, I’ve been searching for UK shares to buy, which may capitalise on this rebound. 

Here are three blue-chip companies I’d buy for my portfolio that I think could benefit or are already benefiting from surging demand. 

UK shares to buy

The first company on my list is B&Q owner Kingfisher (LSE: KGF). All indicators point to the fact that the DIY and construction market across the UK is recording rapid growth.

As one of the largest DIY retailers in the country, Kingfisher is and could continue to benefit from this trend. According to its first-quarter trading update, like-for-like sales in the three months to the end of April increased 22.5% compared to the same period in 2019. 

Based on this growth, the corporation now expects to report a pre-tax profit ahead of previous expectations for the year. That’s one of the key reasons the firm is on my list of UK shares to buy. 

Of course, the company isn’t guaranteed to hit this target. Another economic lockdown could upset forecasts, and rising costs could eat away at profit margins. This may cause management to revisit profit projections. 

Still, I’d buy the stock for my portfolio today. 

Financial markets

Another company that sits on my list of the best UK shares to buy is the London Stock Exchange (LSE: LSEG). It’s currently experiencing one of its most lucrative periods in recent history. In the first quarter of this year, LSEG saw its strongest IPO start to the year since 2007, with 20 floats raising £5.6bn. This could produce windfall profits for the exchange operator.

As well as this boom, the firm may report higher revenues from increased trading volumes if the UK economy reports strong growth in the years ahead. 

Unfortunately, stock markets are incredibly cyclical. The current IPO boom may not last. And if economic growth slows, trading activity might fall. This would almost certainly impact the group’s top and bottom lines. 

Despite these risks, I’d buy the stock for my portfolio today as a UK recovery play. 

Pent-up demand 

The final business on my list of UK shares to buy is the over-50s lifestyle company Saga (LSE: SAGA). While this enterprise came close to the edge last year, it’s taking on the reopening with a stronger balance sheet and re-focused business model. According to its latest trading update, demand for its cruises in the next few years is running ahead of expectations.

Meanwhile, its financial services business provides a steady stream of profits to support the rest of the group.

To develop the financial arm, the company recently appointed Steve Kingshott as Insurance CEO. He’s currently CEO of Tesco Underwriting and chief insurance officer at Tesco Bank.

Key challenges the company faces are a lack of growth in its financial business and coronavirus restrictions, which could derail recovery plans at the cruise division. A further setback may also place pressure on the group’s balance sheet. 

Nevertheless, I’d buy the stock for my recovery portfolio today as I think it’s one of the best UK shares to buy for the reasons outlined. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves 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.

More on Investing Articles

Group of young friends toasting each other with beers in a pub
Investing Articles

Is the Diageo share price coiled to rebound?

Christopher Ruane explains why he remains bullish about the long-term outlook for the Diageo share price and would happily invest…

Read more »

Young Asian woman holding a cup of takeaway coffee and folders containing paperwork, on her way into the office
Investing Articles

How I could make a 10% yield for high passive income a reality

Jon Smith explains how he can target high passive income from top-yielding stocks, including one specific example he'd consider.

Read more »

Investing Articles

I’d buy 1,784 shares of this FTSE 100 stock to target £350 of monthly passive income

Muhammad Cheema takes a look at how British American Tobacco shares, with a dividend yield of 10.1%, can generate a…

Read more »

White female supervisor working at an oil rig
Investing Articles

1 ex-FTSE 100 stock that I think will get promoted soon

Jon Smith flags up an energy stock that used to be in the FTSE 100 and currently has strong momentum…

Read more »

Shot of a young Black woman doing some paperwork in a modern office
Investing Articles

With an 8% dividend yield, I think this undervalued FTSE stock is a no-brainer buy

With an impressive yield and good track record of payments, Mark David Hartley is considering adding this promising FTSE share…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

£9,500 in savings? Here’s how I’d try to turn that into £1,809 a month of passive income

Investing a relatively small amount into high-yielding stocks and reinvesting the dividends paid can generate significant passive income over time.

Read more »

Businesswoman analyses profitability of working company with digital virtual screen
Investing Articles

Dividend star Legal & General’s share price is still marked down, so should I buy more?

Legal & General’s share price looks very undervalued against its peers. But it pays an 8%+ dividend yield, and has…

Read more »

Investing Articles

Dividend shares: 1 FTSE 100 stock to consider buying for chunky shareholder income

This company’s ‘clean’ dividend record looks attractive to me and I’d consider buying some of the shares to hold long…

Read more »