Could these be two of the best UK stocks to buy in August? Let me explain why the answer could be yes.
A gaming great
The staggering rate at which the video games market is growing offers plenty of UK shares to get excited about. I myself have invested in development services provider Keywords Studios to ride this theme. And I’d happily buy software developer Frontier Developments (LSE: FDEV) to make money from this phenomenon.
There’s no guarantee that a game title will be a success. Technical problems and a poor critical reception can prove a disaster for games developers like these. But Frontier has a decent track record on this front and Jurassic World Evolution for example — the sequel of which is set for later this year — sold a staggering 2m copies in the seven months following its release a couple of years back.
Analysts at Accenture say that the global video games market is worth a whopping $300bn. This is bigger than the music and movie industries combined. And they think there will be 3.1m gamers by 2023, a 400m rise from today’s levels. Frontier Developments could have a massive role to play in this fast-growing industry. And I think its low forward price-to-earnings growth (PEG) ratio of 0.7 makes it one of the best value stocks for me to buy today.
One of the best UK pharma stocks?
Buying UK pharmaceutical shares could also prove a wise strategy for me as global investment in healthcare grows. There are several British stocks I can buy to ride this strategy, perhaps most notably either AstraZeneca or GlaxoSmithKline. But I think a better way to play this theme could be to invest in Alliance Pharma (LSE: APH).
This is because drugs development is notoriously problematic. And even those two FTSE 100 giants I mentioned above are no strangers to disappointment at the lab bench. Such troubles can result in huge unexpected costs and a great big hole in the revenues column if they fail to launch on time (if at all). This is where Alliance Pharma could prove to be a better buy. The drugs that this pharmaceuticals stock acquires have already gone through the initial testing phase.
That’s not to say that this UK healthcare stock is totally without risk, of course. The products it chooses to snap up could come under scrutiny further down the line. And its acquisition-led model leaves it in danger of overpaying for a drug that may fail to deliver anticipated results.
However, Alliance Pharma has a packed portfolio of labels like revenues drivers Kelo-Cote and Nizoral, products that have underpinned splendid sales growth for years. This UK share doesn’t come cheap — it trades on a forward price-to-earnings (P/E) ratio of 19 times. But I think it could prove worthy of its slightly heavy paper valuation.
