So what UK stocks are experts recommending?

Seven professional stock picks

In order of market cap, here are the top picks from Jefferies’ team of professional analysts:

Investing in industrials when the sector’s macroeconomic environment is challenging is definitely a contrarian move. But digging deeper into Jefferies’ thesis, they may be on to something.

A hidden opportunity?

The last few years have been tough for British manufacturers. Higher labour and energy costs have weighed heavily on profit margins. But in the last six months, there have been signs of a cyclical recovery.

The UK Manufacturing Purchasing Managers Index (PMI) has been steadily rising since May 2025. And as of February, it now stands at 51.7. As a quick crash course, the PMI measures whether or not an industry is expanding or contracting. And a value above 50 means growth has re-entered the manufacturing sector.

There are a number of forces at work here. But the two primary drivers are:

1. Higher defence spending demand tailwinds.
2. New efficiencies from investments into artificial intelligence (AI) and automation.

So while the sector as a whole is still far from thriving, Jefferies is placing a bet that the UK’s leading manufacturers are well positioned to re-expand profit margins and deliver steady compounding returns for shareholders.

Time to buy?

Given the deeply discounted valuations within the UK industrial sector, Jefferies’ share price targets are quite exciting. And as a quick calculation, £10,000 invested equally across these businesses could grow to £12,961 by this time next year.

However, like all investments, nothing’s guaranteed. While the UK Manufacturing PMI’s on an upward trend, that could soon reverse as another Minimum Wage hike comes into effect in April, along with surging energy costs due to the war in Iran.

There are also company-specific factors for investors to consider carefully. For example, Rotork’s currently caught in the crossfire of the Iran war. Saudi Aramco, ADNOC, and QatarEnergy have all drastically reduced oil & gas production due to the ongoing conflict on their doorstep.

The result? A sharp drop in demand for Rotork’s flow control instruments used throughout the Middle Eastern energy sector. With projects being delayed, the company’s facing some significant demand headwinds, which could derail its progress if the conflict turns into a protracted war.

Having said that, in the long run, the company may end up being a beneficiary once peace returns to the region. After all, damaged pipelines and production plants will need new valves and actuators to repair – something Rotork will be more than happy to supply.

With that in mind, I think Jefferies might be right to be bullish right now, and it’s why I think investors should think about taking a closer look at all the stocks in this industrial basket.

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The good news is that by planning ahead and investing £500 each month in quality stocks, it’s possible to fill this £31,352 income gap. Here’s how.

Aiming for a comfier lifestyle

If a £31,352 passive annual income’s the goal, then following the 4% withdrawal rule, a portfolio will need to be valued at £783,800. That’s obviously a hefty chunk of change. And it’s massively larger than the average £150,000 pension pot in Britain.

Yet, while three-quarters-of-a-million pounds may seem out of reach, building this level of wealth is not as impossible as most people think. In fact, assuming the stock market continues to generate an average return of 8% a year over the long run, anyone who invests £500 each month will hit this milestone in around 30 years, even when starting from scratch.

So for any 38-year-olds starting from scratch today, now’s an excellent time to get cracking if the plan is to retire at 68.

An uncomfortable truth

While £43,900 might be the key to a comfortable pensioner’s lifestyle in 2026, continuous, steady inflation likely means that won’t be the case 30 years from now. As such, it’s likely a prudent move to aim a little higher.

This is where stock picking enters the equation. By being more selective, a portfolio can go on to vastly outperform the market. And that’s something shareholders of Rotork (LSE:ROR) know all too well.

Since its IPO roughly 30 years ago, the industrial engineering group kept its operations asset-light and highly profitable. By outsourcing the manufacturing of critical industrial components and expanding its aftermarket services offer, the business embedded itself into the supply chains of multiple critical industries like oil & gas, mining, chemicals, and power generation.

The result? Rotork’s products are now considered the industry gold standard, particularly for flow control systems, with a multi-decade reputation for quality supporting ever-expansive pricing power.

And for anyone who’s been investing £500 each month since 1996 is now sitting on a jaw-dropping £2.7m – enough to generate a £107,613 retirement income even without the State Pension!

Still worth considering?

Even after three decades of growth, there remains a compelling bull case. The energy sector’s transition towards natural gas, hydrogen, nuclear, and renewables all require extensive flow control equipment. And this momentum’s only being accelerated by the build-out of cooling systems for AI data centres.

Of course, this multi-decade growth runaway isn’t a straight line. Capital project spending is highly cyclical in the short term. And in recent years, higher interest rates have wreaked havoc with many projects being downsized, delayed, or even outright cancelled.

The group’s highly cash-generative aftermarket services have provided management with the financial flexibility to navigate the downturn. But that hasn’t prevented revenue growth from slowing considerably, resulting in Rotork shares remaining stagnant for the last five years.

This perfectly highlights the multi-year cyclical challenges Rotork has to navigate. Nevertheless, with market conditions seemingly starting to improve, now could be a good time to take a closer look at this proven compounder.

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It’s hard for him to move the dial by investing in smallish companies. So, he often looks for vast businesses with huge market capitalisations.

Many smaller opportunities pass under his radar. And that’s despite lots of them having the qualities he tends to look for in an investment.

The FTSE 250’s Rotork (LSE: ROR) could be one of them. With the share price near 309p, the market capitalisation is about £2.67bn – pocket change for an investor like Buffett.

Quality shines through

However, the stock could be a good candidate for a Buffett-style portfolio even if the Oracle of Omaha himself isn’t all over it. 

For example, it scores well against traditional quality indicators. The operating margin is running near 20%. And the return on capital is close to 24%.

The business operates in a niche market as a market-leading global provider of mission-critical intelligent flow control and instrumentation solutions.

Sectors served by the firm include oil, gas, water, wastewater, power, chemical process, and industrial applications. 

The company’s customers rely on Rotork for high quality and dependable solutions for managing the flow of liquids, gases and powders. And the products offered help customers around the world to improve efficiency, reduce emissions, minimise environmental impacts and assure safety.

In other words, the business operates well up the chain of added value. Its products have a high technical content and strict specifications. And that adds a layer of defence for its market share. It would likely be hard for any other metal-basher business to compete with Rotork.

The situation could add up to being the kind of economic moat that Buffett looks for with his investee businesses.

Good recent trading

Meanwhile, a trading update today (22 November) covers the four-month period to 29 October.

The directors said the performance of the business was in line with expectations. And order intake “showed improvement” compared to the situation a year earlier. For the full 10 months since the start of the year, orders were up by 10%.

There’s been some improvement in the supply chain challenges that held back deliveries earlier in the year. And looking ahead, the directors expect “strong growth” in revenue for the full year with an improvement in adjusted profit margins. 

City analysts have pencilled in an earnings uptick of almost 13% for 2023 and nearly 10% for the following year.

Set against those expectations, the forward-looking earnings multiple for next year is running at just over 19. And the anticipated dividend yield is a little under 2.5%.

But that valuation looks quite full and could be considered a mark of quality. However, one of the risks here is that there’s bound to be an element of cyclicality in the business. And that could lead to contracting earnings at times. 

I’d seek a margin of safety like Buffett does and research the stock now before considering it for possible purchase on dips, down-days and temporary setbacks.

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Leading engineering firm

As a quick introduction, Rotork is an engineering business with a focus on designing, developing, and selling valves, actuators, and instruments that are crucial to the flow of gas and liquids through industrial plants. Most of its business is in the oil and gas sectors, however, it also has a presence in water, waste, chemicals, and the nuclear power industry.

So what’s happening with Rotork shares currently? Well, as I write, they’re trading for 240p. At this time last year, the stock was trading for 349p, which is a 31% decline over a 12-month period.

A FTSE 250 stock with risks

Firstly, I note that Rotork shares look a bit expensive on a price-to-earnings ratio of 26. There is every chance that future growth could already be priced in here. On the other hand, could it be a case of a top company trading at a premium price? The old adage you get what you pay for springs to mind here.

Next, Rotork’s exposure to the gas and oil market is a long-term concern. With global initiatives to move towards electric power and green alternatives, could it see performance and returns affected? What sets my mind at ease here is its diversified business model and access to other industries.

The positives and what I’m doing now

So to the positives. I always refer to performance track records and Rotork’s looks impressive to me. I do understand that past performance is not a guarantee of the future, however. Looking back at the past four years, it has recorded consistent revenue and profit for this period. It even recorded positive trading during the pandemic period.

There aren’t many stocks that can say they haven’t cut their dividend since 1988. Rotork can, however. Now I am aware that dividends can be cut or even cancelled at the discretion of the business at any time. Rotork’s current dividend yield stands at 2.6%. This is higher than the FTSE 250 average, which is just under 2%. Consistent and stable returns is something I want all the stocks in my holdings to offer me.

Finally, I am buoyed by Rotork’s growth journey over the past few decades. I can see that it has managed impressive recent performance, which includes high profit margins and returns, as noted above. It also tells me it has the knowledge, experience, and know-how to navigate macroeconomic issues, such as the ones we have experienced in the past two years and counting.

Despite trading for a premium, I’d add Rotork shares to my holdings. Its position in the market, track record of performance and returns helped me make my decision. I will keep a keen eye on developments as the oil and gas market changes, however, and see how Rotork adapts.

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Both companies have paid dividends continuously for over 25 years. And both look decent value to me after this year’s market sell off.

Rotork: engineering excellence

Rotork (LSE: ROR) provides the super-reliable valves, actuators and instruments needed to keep gas and liquid flowing safely through industrial plants. The company’s heritage is in the oil and gas sector. But it’s also active in water, waste, nuclear power and the chemical industry.

Rotork was founded in 1957 and listed on the London Stock Exchange in 1968, so it has a fairly long history. Unlike some comparable companies, this firm has also stayed true to its original mission. I see that as an attraction. It suggests to me that Rotork is a market leader in its sector and has probably been well managed over the years.

Challenges ahead?

While I’m confident Rotork has a strong future, I’m aware that the oil and gas market contributed more than 40% of group profits last year. I wonder if there’s a risk that this market could shrink over time, as electric power replaces petrol and diesel.

I don’t know how the future will pan out. But I do know that Rotork has successfully evolved for more than 65 years. I think this business will probably continue to do well.

Its shares aren’t obviously cheap, trading on 20 times 2022 forecast earnings with a 2.8% dividend yield. However, this company has high profit margins, and the dividend hasn’t been cut since at least 1988.

If Rotork can return to stable growth after the disruption of the pandemic, I think the shares could be good value at current levels. Rotork is on my short list to buy.

Savills is my top property pick

Many UK housebuilding stocks offer high dividend yields at the moment. However, I think this could be a sign that the market expecting a housing slowdown.

Instead of housebuilders, I’m looking at buying a different type of property stock for my portfolio. The company I’m eyeing is international real estate group Savills (LSE: SVS).

This £1.6bn firm was founded in 1855 as a London property agent. Today, Savills operates globally. The business provides services to a range of commercial and industrial sectors, as well as wealthy individuals.

The group’s latest update confirmed that trading during the first part of the year was in line with expectations. I’m pretty confident that Savills will continue to be successful. I reckon the group’s diversity should provide some protection against recession risks.

My main worry about Savills is that its growth may have been boosted by ultra-low interest rates since 2009. With these now rising in most parts of the world, I wonder if Savills’ growth could slow.

However, I think that some risk is already priced into Savills stock. This FTSE 250 share currently trades on 10 times forecast earnings, with a well-covered dividend yield of 3.2%.

I reckon this stock looks a fairly safe buy at this level. I’m hoping to add the shares to my portfolio when I have some cash available.

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Despite this downward trajectory, the group’s 12-month return is still a respectable 10%. So what was in this announcement that has investors so upset? And should I look at this as a buying opportunity for my portfolio?

A bit of background

As a quick reminder, Rotork is a global engineering company leading the charge in flow-control instruments. These are specialist tools used throughout several industries, including oil & gas, water & waste management, and chemicals production.

Although the business sells a niche collection of products, it seems demand from its customers remains strong. Why? Because over the last four months, order intake is up by a high single-digit percentage in-line with expectations.

Despite pandemic disruptions, customers are still spending increased amounts on upgrading or developing new facilities that require the firm’s instruments. Needless to say, rising demand and a growing pile of orders is a positive sign for the Rotork share price. So why is the stock falling?

Covid-19 versus supply chains

Developing and manufacturing specialist equipment requires unique components, specifically semi-conductor chips and electronics. But due to the pandemic, resource deliveries to the group’s manufacturing facilities are frequently delayed, often on short notice.

Consequently, several production lines have had to be shut down repeatedly for periods spanning up to several weeks. In other words, while customer orders are on the rise, Rotork is struggling to fulfil them.

Since the company usually gets paid on item delivery, revenue over the past four months is down year-on-year. And due to inflationary pressures pushing up the cost of raw materials, operating profit margins have also taken a significant hit. That’s obviously bad news for the Rotork share price.

Over the long term, supply chain disruptions will eventually be resolved. But in the near term, they’ll likely continue to pose a problem. At least that’s what management thinks since it provided guidance that expects revenue to stay depressed for the remainder of the year.

Is the falling Rotork share price a buying opportunity?

Seeing the revenue stream getting somewhat derailed is frustrating. But due to the exceptionally niche segment Rotork operates in, its list of competitors is quite short. And all of them are likely suffering from the exact same issues. That indirectly creates a bit of stickiness for customers simply because there isn’t really an alternative firm to source necessary components from.

Supporting evidence of this is clear since management anticipates “entering 2022 with a record year-end order book.” 

If the company can get its products off the manufacturing line and into customers’ hands next year,  today’s drop in Rotork’s share price could be a buying opportunity for my portfolio.

Personally, I’m going to wait and see what happens before committing to an investment. Therefore, Rotork is staying on my watchlist for now.

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For context, the company scores well against quality indicators. For example, the operating margin is running just above 20%. And the business is delivering a return against invested capital of a little over 19%. I’m also keen on the small net cash position on the balance sheet. And I like the company’s long, multi-year record of steady revenue, earnings and cash flow.

Why I think Rotork is a top UK stock

In short, Rotork strikes me as a quality operation. And the business traded well through the pandemic. Meanwhile, in the April update, the directors confirmed that activity “continued to improve” in the first quarter of 2021. So, that’s two ticks on my stock-picking checklist. A quality set-up, and an improving business.

Like many companies, Rotork has been seeing rising input costs, such as raw materials, commodities and logistic services. But commodity cost inflation will likely be offset by the company’s selling price increase applied in January. And the ability of many businesses to raise their prices is why I reckon stocks can be a decent asset to hold when inflation bites. Rotork also applied temporary surcharges to some delivery routes to mitigate the higher logistics costs.

The directors reckon the firm’s ‘Growth Acceleration Programme’ is on track. And as part of the plan, 2021 should see progress towards supply chain optimisation and an IT solutions roll-out. Meanwhile, the directors reassured shareholders the business “continues to be highly cash generative.” And the net cash figure on the balance sheet stood at almost £191m on 4 April, up from just over £178m on 31 December 2020.  

The strength of Rotork’s cash performance is great news for shareholders because the directors decided to pay the dividend for 2020. So, despite the pandemic, the company hasn’t missed a single dividend payment. And I think a firm’s dividend record speaks volumes about the strength and resilience of a business.

A positive outlook

Looking ahead, the directors reckon the business is strengthening and they see Rotork as “well-placed” to benefit from recovering demand. City analysts expect earnings to increase by a high single-digit percentage in both 2021 and 2022. That strikes me as a decent rate of growth. However, the company could miss those figures if the world economy turns downwards again. And I’d then likely lose money on the shares.

Meanwhile, Rotork carries a full-looking valuation. With the share price near 349p, the forward-looking earnings multiple for 2022 is just above 25. Perhaps there’s an elevated risk in a valuation that high. However, higher valuations can remain in place for years and act as a marker of quality.

I’m bullish about the world economy and Rotork’s prospects. So I’d be inclined to invest £2,000 in the shares today with the aim of holding for at least five years. Although a positive investment outcome isn’t certain or guaranteed.  

We’ll find out more about the company’s progress with the half-year results due on 3 August.

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Best stocks to buy now

The first company I would buy today is dotDigital (LSE: DOTD). I think this business could provide attractive returns for its investors no matter what the future holds.

It’s engaged in providing software as a service (SaaS) and managed services to digital marketing professionals. This is a market that has been affected by the pandemic, but it has escaped the worst of the downturn. DotDigital’s net income increased by 21% last year.

Analysts believe this trend will continue in 2021. They’ve pencilled in an increase in net profit of around 10% for the period. 

However, these are just forecasts at this stage and should be taken with a pinch of salt. The company may perform better or worse than these estimates. They’re only designed to give a rough guide to dotDigital’s potential. 

Still, I believe its product has a considerable market. So, no matter what happens over the next 12 months, I think its revenues and net income can grow steadily in the long term. 

That being said, the SaaS market is incredibly competitive, and dotDigital is relatively small compared to its large American peers. The most significant risk facing the company is the threat of competition. There’s also the challenge of cybersecurity. A big data leak or hack could seriously impact the company’s reputation. 

Nonetheless, I reckon dotDigital could be one of the best stocks to buy now for long-term growth, despite these risks. 

Economic expansion

Another company I would buy based on its potential to benefit from the global economic recovery over the next few years is actuator manufacturer and flow control company Rotork (LSE: ROR). 

The pandemic hit the company’s sales and operating profit last year, but the outlook for the group is improving. Increased economic activity around the world should lead to more demand for industrial equipment, which could be positive for Rotork’s order book. As such, I think an improved economic outlook will lead to better investor sentiment towards the business. 

The group still faces headwinds, however. Management does not expect revenues to recover to 2019 levels in 2021. A lot depends on whether or not the global economic recovery does gain traction over the next 12 months. This is far from guaranteed. Another wave of coronavirus could cause a considerable headache for industrial companies like Rotork. 

Still, as a way to play the economic recovery, I think this is one of the best stocks to buy now. That’s why I would buy shares in Rotork today while keeping an eye on the risks the business currently faces. 

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I reckon the business is well-placed to thrive as the world builds back from the coronavirus pandemic. And today’s full-year results report demonstrates the business navigated the difficulties of 2020 well.

Why I think Rotork is a UK share to buy now

One of the key indicators, for me, is what the directors did about shareholder dividends. And the news is good. After first postponing payments when the pandemic first hit, they declared today the total payment for the year will go ahead. And it’s 1.6% is higher than the prior year.

Although revenue in 2020 came in down 7.4% and adjusted earnings per share slipped by 3.1%, Rotork has a “highly cash generative business.” There’s a multi-year record of generally rising free cash flow. And the balance sheet looks robust with its modest net cash position.

And I like the firm’s other quality indicators, such as the return on capital and the operating margin, both running just below 20%. However, the company’s attractions have been acknowledged by the market and the shares come with a full-looking price tag.

The stock looks buoyant today on the news of these results. And with the share price near 372p, the forward-looking earnings multiple for 2021 is a little under 30. However, City analysts expect a modest advance in earnings just above 5% for that year.

Chairman Martin Lamb explained in the report the outlook for the company’s end markets is improving. Although there’s still uncertainty regarding the future course of the pandemic, Rotork’s production facilities are operating “largely” as normal. And I reckon the relative strength of today’s figures shows the firm traded well last year through the lockdowns.

A solid order book

Looking ahead, Lamb also said the order book is “solid”. As reasons to be optimistic about the outlook, he pointed to the “considerable flexibility” provided by the strong balance sheet. He thinks the recent reinvestments into the business have strengthened it and placed it well to benefit from recovering demand.

The company’s goal, he said, is to deliver “sustainable” mid-to-high single-digit percentage revenue growth over time. On top of that, the firm is targeting an adjusted operating margin in the “mid-20s”.

I see Rotork as a potential long-term quality investment that I’d aim to hold for at least 10 years. But it’s worth noting the business has endured volatile periods in the past. For example, around 2014/15 earnings and the share price dipped. And the stock has only just risen above a trading range and consolidation of some eight years in duration.

Nevertheless, I’m tempted by the resilience of the underlying business. And I’d aim to buy some shares on dips and down-days to hold for the long-haul. However, I’m not expecting fireworks ahead. And the high valuation could bite me if earnings fail to grow as expected.

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A first-half update Tuesday showed solid progress across the board, with orders up 7%, revenue up 9%, underlying pre-tax profit up 7% as reported (and 2% on an organic basis), and underlying EPS up 6%.

On the basis of the strength of the first half, chief executive Tony Wood said: “We have increased our full year organic revenue growth guidance to 4 to 6% and remain on track to deliver a margin improvement of between 0 and 50 basis points in 2019.”

Cash

On the progressive dividend front, he added: “The acceleration in growth and our continuing confidence in the prospects for the group underpins our interim dividend increase of 5% to 5.55p.”

The full-year dividend is predicted to grow by the same proportion, and my view is that steady rises ahead of inflation are the true mark of a good long-term dividend.

One thing I like about Meggitt is it bases annual dividend growth on underlying long-term prospects, not on year-by-year earnings. That’s good, because the timing of multi-year contracts and payments in the aerospace and defence business is often erratic in the short term, and long-term investors need to look beyond that.

The shares have had a bullish month, and that’s raised them to a forecast P/E valuation of 16.3. But that would drop to around 14.5 on 2020 forecasts, and I think it’s a fair valuation for what I see as an attractive and safe long-term investment.

Jump

Rotork (LSE: ROR) shares got an even bigger boost from first-half results, popping up nearly 10% in morning trading, although on the face of it the figures looked mixed.

Orders dropped 1.3%, with revenue down 4.3%, though adjusted operating profit improved by 1.7% (with an operating margin up 120 basis points). Adjusted earnings per share rose by a modest 1.5%, but the company raised its interim dividend by 4.5%, “reflecting confidence in progress for the full year.”

Chief executive Kevin Hostetler says the firm should deliver “mid to high single digit revenue growth and mid 20s adjusted operating margins over time.” This is another business I think is likely to see short-term volatility as a result of the nature of long-term contracts and a cyclical side to the industry.

Brexit

The flow-control specialist supplies global oil & gas, power and water businesses, and could be one to go for to protect your investments from the growing possibility of a no-deal Brexit. I suspect the defensive global nature of its business has been attracting investors. But I can’t help feeling that might have pushed the share price up a bit far.

We’re looking at a P/E of nearly 23 based on full-year forecasts which, for me, puts it pretty much in the realms of growth valuations. But it’s at a time when EPS growth is expected to fall from last year’s 19% to just 3%.

After a tough second half in 2018, I can’t help wondering if the price might be getting a bit overheated again in 2019. I think I’d wait for better buying opportunities.

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