Last year, the UK economy recorded one of its worst recessions in 300 years. However, this year, economists believe the country will record one of the fastest economic bouncebacks of any wealthy nation. With that in mind, I’ve recently been looking for the best shares to buy now to profit from this recovery. Here are some of the stocks I’ve been eyeing up with the intention of adding them to my portfolio.
The way I see it, there are three different groups of companies I can invest in that have exposure to the economic recovery. These are the construction and materials sectors, the hospitality sector, and the engineering sector.
I think some of the best shares to buy now in the construction and materials sector are Morgan Sindall and Breedon. The latter is a construction materials group, while the former is one of the country’s largest building businesses.
Morgan’s latest trading update provides some guidance concerning the current state of the construction industry. Management expects profit before tax to increase 238% for the first six months of 2021.
Meanwhile, its order book at the end of June was £8.3bn, up 5% from the same time last year. These figures show demand for the group’s services is high, suggesting the market for materials has also rebounded.
That’s why I’d buy both Breedon and Morgan. I think the two businesses could complement each other well.
That said, construction is an incredibly cyclical industry. It’s usually the first to suffer in an economic downturn. Therefore, if the economic recovery suddenly grinds to a halt, these firms may feel the pressure.
Best shares to buy now in hospitality
The pandemic has severely impacted the hospitality sector. However, some companies have adapted better than others. The owner of the Real Greek and Franco Manca brands, Fulham Shore, is one such business.
Under lockdown, the firm shifted to selling takeaway pizza. And as the economy has reopened, consumers have flocked back to its eateries. In the first full week of reopening, revenues exceeded 100% of 2019 levels.
I’ve been so impressed by its performance, I’d be happy to own just this one hospitality stock in my portfolio. Of course, this approach might not be suitable for all investors. Hospitality can be a tricky business. It’s super competitive, and profit margins are tiny. I’ll be keeping these risks in my head as we advance.
The final basket of companies in my portfolio of the best shares to buy now is engineering stocks. Here I’d buy international mining equipment producer Weir and Bodycote.
Both of these firms provide vital components. Weir makes components for processing resources, while Bodycote is a provider of thermal processing services, such as heat treatment.
I think both firms have robust competitive advantages because customers are unlikely to go elsewhere just to cut costs. If they do, they run the risk of the product failing.
This competitive advantage is the main reason why I’d buy both engineering stocks today. While I think both companies are attractive, I should note they’re also highly geared to the economic recovery. If the global economic recovery should run out of steam, these operations may be the first to suffer.
Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended Bodycote and Weir. 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.