I’ve been looking for UK shares to buy for my portfolio that may profit from the economic revival. I’ve been focusing on cyclical stocks, which should see an uplift in sales and earnings as demand recovers.
Sadly, these organisations may not be suitable for all investors. The cyclical nature of these businesses means they can do well in an economic updraft, but they are usually the first to suffer in a downturn.
Still, I’m perfectly comfortable with the level of risk involved. As such, here are five UK shares I’d buy today.
Recovery shares to buy
As the global economy has reopened over the past six months, the oil price has jumped to a multi-year high. Therefore, I’m looking to buy some exposure to the oil and gas sector. There are two ways of doing this, through service companies and production companies.
I’d buy both, so I’d acquire service company Hunting and the producer Harbour Energy. Initial indications suggest both of these companies are already benefiting from higher oil prices.
For the six months to the end of June, Harbour reported a profit after tax of $87m, compared to a loss of $155m in the same period last year.
A slow start to the year means Hunting expects earnings before interest, tax, depreciation and amortisation (EBITDA) to be slightly lower this year than last. However, management has noted that a “strengthening order book” should underpin the group’s recovery in 2021.
Both of these stocks are on the road to recovery, but a sudden drop in oil prices could cause havoc with their forecasts. This is the most considerable risk they face today.
Jobs market growth
Elsewhere, I’d also buy recruiters Hays and Pagegroup for my portfolio of the best UK shares to buy. A tight jobs market is putting upward pressure on wages, great news for recruiters who are usually paid a percentage of the salary of successful candidates.
Hays’ net fee income for the three months ended September jumped 41%. Pagegroup’s gross profit for the third quarter jumped 64%.
These figures show how the recovery is driving growth at these two businesses. That’s why I’d buy both stocks for my portfolio today.
However, I should also acknowledge they will be the first to see an impact on earnings in a downturn. That’s something I will be keeping an eye on.
Construction market
The final corporation I’d buy is the construction materials group Norcros. Consumer spending is driving a recovery at this company. Sales for the 26 weeks to the 3 October jumped 18% on 2019 levels.
While I think it’s unlikely this kind of growth will continue, windfall profits allow management to strengthen the balance sheet and increase marketing activity. These investments should pay off in the long run.
Rising prices and increased competition from peers in the sector are risks that may challenge growth.
