As the global economy reopens, I have been looking for UK shares to add to my portfolio that may profit from the reopening.
There are a handful of companies that I believe are better positioned than most to ride the recovery. Here are my three favourite stocks I would buy to play this theme right now.
UK shares to buy
The first stock on my list is Premier Inn owner Whitbread (LSE: WTB).
This company is already experiencing a rebound in demand from customers. According to its CEO, during the 13 weeks to 27 May, the group traded “significantly” ahead of the market as the economy reopened.
As well as seeing higher demand from consumers, Whitbread is also opening new hotels. It opened 10 new hotels with 1,189 rooms in the 12 weeks to the end of May.
This combination of higher consumer confidence and an enlarged hotel footprint should prove to be a double tailwind for the company.
However, rising coronavirus cases may hurt consumer confidence. This could set back the company’s recovery. Another economic downturn could also reduce demand for hotel rooms.
Despite these risks, I would buy the company for my portfolio of UK shares today.
Travel demand
As well as Whitbread, I would buy hotel franchisor Intercontinental Hotels (LSE: IHG). I think the group should benefit from the same tailwinds as Whitbread, namely improved consumer confidence and the opening of new properties in the months and years ahead.
In its first-quarter trading update, the company said it had opened 7,300 rooms across its estate in the first three months of 2021. And it has a further 274,000 rooms in the pipeline.
Unfortunately, not all of these new rooms may work out. The group sold or closed a total of 61 hotels and 9,500 rooms from its portfolio in the first quarter. This figure shows Intercontinental’s growth is by no means guaranteed.
Nevertheless, with the global travel market opening up again and hundreds of thousands of new rooms in the pipeline, I would buy this firm for my portfolio of UK shares as a recovery play today.
Slow and steady
The final stock I would buy is distribution group DCC (LSE: DCC).
The company’s size is its most significant competitive advantage. DCC has the size and financial firepower required to roll up smaller peers and buy up growth in the highly fragmented distribution industry. Recent acquisitions include Primagaz by DCC LPG, Jones Oil by DCC Retail & Oil and Azenn by DCC Technology.
As well as these deals, it appears as if the group as a whole is firing on all cylinders. According to its latest trading update, during the quarter ended 30 June, DCC traded “very well” and built on the solid performance recorded for 2020. The company has benefited from the reopening of the global economy and higher demand for products such as fuel oil and LNG.
The most considerable risk hanging over the stock is the company’s large level of debt. Its acquisitive nature means DCC depends heavily on outside financing. This could be a risk if the group’s creditors decide to walk away.
Even after taking this risk into account, I think the company’s growth potential is incredibly exciting, which is why I would buy the stock for my portfolio.
