The UK stock market has been performing well lately and the FTSE 100 is up 17% over the past year. But I still think there are bargains in the market. Here are three top UK stocks I would buy now for my portfolio with £1,500, putting £500 into each of them.
It’s easy to forget that S4 Capital (LSE: SFOR) is only a few years old. Its meteoric rise means it already has a market capitalisation well in excess of £3bn. Its digital agency brands such as MediaMonks and MightyHive might not have space bars on their keyboards, but they know how to work some digital magic nonetheless. A fast-growing reputation has led to the company winning large clients such as Google and BMW.
This year, organic revenue and profit growth is expected to come in at around 30%. On top of that, the company’s acquisitive nature could add more revenue. The shares have continued to rise as the company has grown, adding 113% over the past year. But I remain bullish. The company’s strong organic growth suggests it has an attractive customer offering. Over time its digital focus is set to become more and more relevant. S4 has dynamic leadership which is moving at speed, something I also think could help propel the shares.
Moving fast brings risks too, though. Integrating acquisitions takes time and if it is rushed and done poorly, revenues could fall.
Top UK stocks: Imperial Brands
Tobacco is often seen as offering income not growth. Imperial Brands (LSE: IMB) certainly delivers when it comes to income. The current yield of 8.8% is among the highest of any top UK stocks. That alone is a reason I hold the shares.
But could there be growth potential here too? After all, Imperial shares are well below half of where they traded five years ago. There are reasons for that: the company cut its dividend and has sold some attractive assets including its premium cigar business. But I wonder whether that justifies the share price fall we have seen. Revenue grew 6% in the first half compared to the prior year, and organic adjusted revenue was up 2.4%. The company also increased its dividend by 1%. While none of those figures are spectacular, Imperial is on a growth trajectory. With a price-to-earnings ratio of just 6, I see some growth as well as income potential here.
But the company’s heavy reliance on cigarettes is clearly a risk. With cigarette consumption declining in many markets and a rise in ethical investing, future revenues could fall.
Another FTSE 100 name on my list of top UK stocks to buy now is consumer goods giant Unilever. The maker of products from Dove to Marmite has a global reach I think helps insulate it somewhat against localised economic downturns. With well-known brands in everyday categories such as detergent and mayonnaise, I think its business offers some stability to an investor like me.
I would consider buying Unilever right now, when it is offering a 3.5% yield. But delayed reopening in many markets is a risk for the company, as it threatens sales to food service customers, for example.
Christopher Ruane owns shares in Imperial Brands, S4 Capital and Unilever. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Alphabet (A shares) and Alphabet (C shares). The Motley Fool UK has recommended BMW, Imperial Brands, and Unilever. 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.