I’ve continued to buy UK shares for my Stocks and Shares ISA, despite the Covid-19 outbreak. I can fully understand why many stock investors have decided to duck for cover, though. The massive dividend cuts of 2020 highlight how UK plc has struggled during the public health emergency and the economic downturn.
Clearly UK share investors need to be careful before splashing the cash today. And individuals should never invest money that they can’t afford to lose. The Covid-19 crisis might linger on and on should virus mutations offset the impact of vaccine rollouts. Brexit, trade wars, and booming sovereign debt levels also pose dangers to shareholder returns.
Playing the FTSE 100 game
I think there are still ways for investors to make money with UK shares despite the downturn, however. And investing in FTSE 100 stocks is one way to go about this. Britain’s blue-chip index is packed with companies that have the financial clout to navigate the Covid-19 crisis. It is also rammed with top stocks that operate in classically-defensive sectors like defence, non-life insurance, healthcare and utilities.
Finally, a great many FTSE 100 companies have exposure to a large number of geographies from which they generate their profits. This gives them an extra layer of security as they aren’t dependent on strong economic conditions in one or two places in order to generate profits growth.
None of this is a guarantee of success, of course, but it does help.
With this in mind. I’m looking at a top UK share from the FTSE 100. I think it could deliver mighty returns for me in spite of the uncertain macroeconomic and geopolitical landscape.
A UK share I’d buy today
London-focused residential property builder The Berkeley Group (LSE: BKG) isn’t without risks in 2021. This is because the stamp duty holiday on English properties below £500,000 ends on March 31. Data from the Halifax shows that average home prices in the UK fell at their fastest rate for nine months in January. This suggests that house-buyer demand could be starting to dry up.
It’s a problem for the likes of Berkeley, sure. But it doesn’t mean that UK shares like this can’t enjoy a year of profits progress in 2021. Interest rates remain low and government Help to Buy ISAs and equity loans are still in place. In my view, these could mean that new-build demand from first-time buyers largely remains robust. This is particularly the case the uncertain economic picture is discouraging some existing homeowners from listing their properties.
This explains why City analysts reckon annual earnings at Berkeley will rise 2% this fiscal year (ending April 2021). It’s also why they forecast healthy bottom-line increases of 5% at the firm in each of the following years too.
I know analysts can get it wrong and demand could be affected by a prolonged economic downturn. Yet I still see plenty of opportunities for the firm. London is one of the most crowded cities on earth and its population was around 9.3m in 2020. I think this UK share, responsible for around 10% of new homes supply in the metropolis, is in the box seat to ride this population explosion.
