The UK economy looks fragile at the moment. With the energy crisis driving inflation to historic highs and the pound falling, analysts expect the recovery to be sluggish and difficult. UK shares have been widely affected too, putting investors on high alert. 

Conversely, few sectors are currently witnessing a boom. But those companies that have continued to show strong growth are now receiving investor interest. I think this is the perfect time for me to diversify and pick up quality stocks on the way up. 

Shares that are defying trends

While the FTSE 100 is down over 6% this year, two overlooked gems on my watchlist have risen over 40% in three months. But looking at the fundamentals, they still look cheap. Let’s dive in. 

The energy sector is red hot right now. Despite the renewable energy push, oil is expected to power a majority of our industries for the foreseeable future. 

UK’s largest independent oil and gas business is Harbour Energy (LSE:HBR) and it has benefited greatly from this. Its shares are up over 41% in the last three months thanks to surging profits. 

In the first half (H1) of 2022, the company saw a 12-fold increase in pre-tax profits to US$1.49bn compared to $120m in H1 2021. The company cut down its net debt by 50% to $1.1bn and increased its 2022 shareholder payouts to $500m. 

Harbour Energy shares are trading at 448p with a price-to-earnings (P/E) ratio of 4.5 times. Given the current yield of 2.13%, which is expected to increase moving forward, this looks to me like a bargain. 

The next UK share on my list has jumped 47% over the last three months. 4imprint Group (LSE: FOUR) is a merchandise manufacturer that operates primarily in the US and controls 4% of the $23.6bn promotional products market.

The firm specialises in designing and manufacturing products that are functional adverts for large companies. 

In H1 2022, operating revenue was $515.54m, up 58% from H1 2021. Operating profits jumped a whopping 1124% to $43.98m primarily because of streamlined marketing and better pricing. 

4imprint doubled its new customer acquisitions and its order book grew 44% to 886,000 in 2022. The board is confident that the revenue target of $1bn will be achieved in 2022.

Its shares are currently trading at 3,645p at a P/E ratio of 20.9 times. Although this is not cheap on paper, I think its revenue growth in 2022 makes it a bargain. Many blue-chip businesses have struggled over the last few months, but 4imprint has shown considerable growth in a highly contested US market. 

Concerns and verdict

Tax cuts will plague oil companies moving forward. The world’s five biggest oil companies saw profits increasing by £50bn between April and June. This prompted a 25% energy profits levy in the UK that will bring the total tax on oil companies to 65%. 

Also, many US businesses are freezing hiring to improve margins. This is indicative of a slowing economy that could affect marketing spend. 

However, both businesses discussed here have reinvested smartly and have stronger balance sheets heading towards 2023. While there could be a slowdown, I think these shares have a lot of growth potential right now. I’ll probably make a lump sum investment in both shares when signs of market recovery become stronger. 

The post Up 40%+ in 3 months! These 2 fast-growing UK shares still look cheap appeared first on The Twelfth Magpie.

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Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Looking at the all-time FTSE 100 graph, the incredible bull run we are in right now is evident. The Footsie is up over 40% since the March 2020 crash. And I am looking at minor crashes along the way as opportunities to cash in on cut-price UK shares.

I hear investors lament missed market opportunities. Right now, some top-quality UK shares are down over 30%! Here are two companies I am watching closely to make an investment in the coming months. 

Reduce your bills

B&M European Value Retail (LSE:BME) is one UK share that has been on my watchlist for a few years. With inflation projected to hit 22% next year, I expect discount retail stores to see a spike in revenue. And B&M has quickly become a big player in this sector. 

While many grocers felt the brunt of rising raw material costs, B&M managed to maintain stable revenue and sales in the financial year (FY) 2022. The group recorded a pre-tax profit of £525m, exactly the same as in FY21. Two-year sales growth (compared to FY20) was at 13%, showing that the business managed to retain a large chunk of its customers gained during the pandemic. 

By focusing on in-demand products and avoiding overstuffing store stock, the company has managed to keep costs low and generate a profit. In fact, overall gross margins went up to 37.4% from 36.9% in FY21. 

Supply chain issues are a big concern for supermarkets right now and B&M is no different. Disruptions in Asia could affect operations in the coming months. Also, rising energy costs mean higher transportation costs that the company will have to deal with.

However, I am impressed by B&M’s frugal business model and its commitment to its dividend policy. Its yield stands at 4.3% and the board is confident about maintaining current levels.

Its shares are down 39.7% in 2022 and are trading at a price-to-earnings ratio of 8.9 times. Given the market share and business model, I think B&M is the best bargain option for my portfolio right now. 

Cheap UK defence share

The world is reeling from the war in Ukraine and defence budgets across the globe are shooting up. I think investing in the sector could be a good growth option moving forward. One UK share that has caught my eye is Babcock International Group (LSE:BAB). 

The firm specialises in electric systems for combat vehicles across land, air, and water. Along with engineering, the company also provides training, assistance, and data management services for militaries. 

In FY22, group revenue jumped 3% to £4.1bn with an underlying operating profit of £238m. The company recently signed defence contracts with Australia, France, Indonesia, and the UK. This has boosted its order book significantly.

There is always an underlying threat of trade restrictions when it comes to defence shares. A ban on sales could vastly impact Babcock’s revenue. The company is also dealing with rising metal prices, which is crucial to an engineering firm’s margins.

But I am still bullish on Babcock shares for my growth portfolio. It has fallen nearly 4% in the last month after a 50% rise since January 2021. I think this presents an attractive entry point at 328p. Currently, this UK share looks like a bargain to me given the high interest in defence, the company’s quality, and momentum. 

The post 2 dirt-cheap UK shares that look ready for liftoff appeared first on The Twelfth Magpie.

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Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has recommended B&M European Value. 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.

Looking at the market recovery right now, I see a lot of opportunities to buy cheap UK shares that were too expensive just a few months ago. I love studying market corrections and analysing sectors that show high activity even during bear runs. And right now, the energy sector, mining stocks and anything electric vehicle (EV)-related looks very popular.

Although I refrain from investing based on fads, current market trends seem to be rooted in important recent developments. Renewable energy has become supremely important after Europe’s latest power crisis. 

I’ve identified three shares that could supplement the growth of this booming industry right now. These UK shares look primed for growth and could boost my portfolio over the coming years.

All charged up

Greencoat UK Wind (LSE:UKW) and Volex (LSE:VLX) are two shares I’m watching closely right now.

Electricity bills across the country are surging. Just yesterday, the Confederation of British Industry warned policymakers about the impact of this on local businesses. And I think this points to the larger crisis as we’re caught between an expensive transition to green energy while fending off sky-high crude oil prices. 

Greencoat UK Wind’s business model involves investing in wind farms and then selling the generated power back to the grid. This relatively low-risk strategy with 90%+ margins means the company is largely cash positive. In the first half of 2022, it has already generated 2,175GWh of energy with a net cash generation of £328.8m.

This share has risen 22% in the last 12 months. And despite this jump, it’s trading at a price-to-earnings ratio of just 4.6 times. I think this is a very attractive valuation for a firm with strong financials and excellent future prospects. 

The next company on my list is Volex, a manufacturer of fibre-optic, copper and battery wires. The company also operates a range of brands in the electronics space that collectively have a global presence. Its main markets are North America (44% of revenue), Asia (23%) and Europe (33%). 

Volex recently developed an EV division that manufactures components for the booming industry. These include charging cables, charging stations and storage systems. 

In FY22, the company saw revenue growth of 38.6% to US$614.6m. The company expects to generate revenue of $1.2bn by the end of FY27. Thanks to strong recent reports, this share has risen 12.8% in the last six months and is finally showing signs of a bounce-back after falling steadily for months.

Concerns and verdict

While both companies look in relatively strong financial positions, they also come with considerable debt. Given the nature of both businesses, a high percentage of profits are invested back into acquiring assets.

Slowing economies remain a concern for Volex, given its international presence. Its buying power could fall if a recession happens, affecting sales and currency values. Greencoat is currently seeing a premium paid for the energy it sends to the grid. If this stabilises, year-on-year profits could fall, spooking investors.

However, I’m bullish on the European energy sector. I think current changes will prove fruitful in years to come. While traditional oil shares have dominated the energy market, I think a shake-up is under way, which is why I’m considering an investment in these two stocks right now. 

The post 2 UK shares from booming industries I’d buy now appeared first on The Twelfth Magpie.

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Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has recommended Greencoat UK Wind. 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.

Thanks to the electronic vehicle (EV) revolution, lithium prices have surged nearly nine times since 2020. Car manufacturers are clamouring to secure lithium reserves after reports show that prices for the soft metal could continue this historic rise. To capitalise, I am looking at two UK shares in the EV space that fit my portfolio. 

Wonder metal 

While most commodity prices have taken a hit in 2022, lithium is still trading close to all-time highs of US$70,000/ tonne. And analysts expect lithium prices to rise anywhere between 150% and 250% year over year until 2028. 

To put the current inflation in lithium prices in perspective, let us look at the price action across 2022. In January, lithium cost $10,000 per tonne. Right now, it is trading close to $68,000. This 580% jump in seven months has made it one of the fastest growing commodities in history. 

And with European EV sales at an all-time high, I think this is the perfect time for me to look at lithium shares in the UK.

Two top UK shares I’m watching

To cut out crude oil, the first step is to develop the battery tech to power our machines. And Ilika (LSE:IKA) is a British battery manufacturer with a focus on lithium-based batteries for EVs and medical devices. 

The firm is working on its ‘Goliath’ battery line, which could become a premium option for the automobile belt in Europe. After years of research, Ilika is finally looking to scale up manufacturing efforts to meet this sudden spike in demand. 

The company is already working with the UK Battery Industrialisation Centre (UKBIC) to create a dedicated 100 MWh manufacturing line. Also, Ilika’s tech was recently accepted into the coveted APC programme to help the UK automotive industry reach net-zero emissions.

The next UK share on my list, Rio Tinto (LSE:RIO). The FTSE 100-listed mining giant has actively been securing lithium reserves across the world. These include the Rincon lithium project in Argentina for $825m and the highly promising $2.4bn Jadar lithium project in Serbia. 

The Serbian government recently revoked the license for the Jadar project, citing environmental concerns. This forced Rio Tinto to propose a new plan that promises a 15% reduction in emissions. According to estimates, lithium from Jadar would meet 90% of Europe’s current needs. And Rio’s board is confident that a resolution can be reached.

Concerns and verdict

Despite the estimated demand for batteries, projects like Ilika could meet huge roadblocks. The company is yet to become cash-positive given its high R&D budget. And the journey to being a new product to the market is tough, especially for smaller firms.

Miners like Rio always run the risk of government interventions that could affect operations. Also, with lithium prices skyrocketing, some analysts are wary of the instability. If the demand from China cools down, lithium prices could drop again, effectively ending the surge. 

However, the EV industry looks unstoppable right now. Even Elon Musk has stated that Tesla could enter the lithium mining market to cut costs. And the two UK shares on my watchlist can help address this demand. If the demand for EVs extends into 2022, I would be tempted to make an investment in both to cash in.

The post Lithium prices skyrocket: 2 UK shares I’d buy to capitalise  appeared first on The Twelfth Magpie.

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• The only FTSE 100 stock I own right now

Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

The FTSE 100 index hosts some of the top companies in the world. While the index receives a lot of investor interest, it is not equally distributed across every company. Darlings like Rolls-Royce and Lloyds see high daily trading volumes, while other top companies are overlooked, especially during a bear run.

I have identified two such FTSE 100 shares that are currently in the bottom half of the index when ranked by the 30-day average trading volume. And I think these companies look like they are ready to explode when the next bull run hits. 

Overlooked superstars

Spirax Sarco (LSE:SPX) and Croda International (LSE:CRDA) were big pandemic winners. Between March 2020 and December 2021, these two shares gained over 110%. In fact, Croda International was a top FTSE 100 performer across 2021, jumping 57% in a year. 

But since this bull run, both shares have fallen significantly. Croda bottomed out at 4,490p in June 2022 after hitting all-time highs in December 2021. Spirax-Sarco too fell over 46% during the same period, bottoming out at 9,130p. 

This caused investor interest to dampen. Thirty-day trading volume for Spirax-Sarco and Croda is currently at 168,000 and 434,000, respectively. For comparison, Lloyds shares recorded 205.33m trades during the same period. 

But I think the tides are changing. Since the June low, both companies have rebounded by over 22%, showing me that if the market is healthy, these shares could grow very fast. 

Finances

Croda International is a speciality chemical company operating in Britain for over a century. It focuses on chemicals used in beauty and personal care products. The firm also has a huge agriculture wing that focuses on chemicals required for crop growth. 

The recently released first-half (H1) 2022 results showed that sales jumped by 21% compared to H1 2021. Similarly, profit before tax went up 26% to £636.5m including proceeds from recent sales. 

The company recently redoubled its growth efforts in the fragrance industry, which is witnessing strong growth in emerging markets. It has a projected valuation of $58.8bn by 2022 which would bring compounded annual growth to 5.6%. 

The second company on my list, Spirax-Sarco, is an engineering firm with a focus on steam management systems. This share gained a lot during the recent green energy push across Europe. And this has gathered more steam this year, making the market ripe for Spirax-Sarco, which creates efficient energy systems for industries. 

In 2021, the company recorded a revenue of £1.3bn, up 17% from 2020. Total profits were £340.3m with an impressive margin of 25.3%. A strong positive is that insiders purchased Spirax shares worth over £462,000 last year and sold nothing.

While these are strong signs for both companies, I think there are some concerns to address. Both boards have noted fluctuating commodity prices as a major cause of concern for the coming months. Also, Croda has been spending a significant amount on R&D, which could backfire if there is a market crash. 

And it is unlikely that these companies will recreate the runs they had in 2020. But given the strong fundamentals and large market share, I think I would make an investment in both companies in 2022 provided the rebound continues. 

The post Hidden gems: these 2 FTSE 100 shares look ready to take off appeared first on The Twelfth Magpie.

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Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has recommended Croda International. 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.

With the global economy in turmoil, UK shares that were pandemic darlings are down significantly in 2022. But a lot of these companies are robust businesses operating in exciting sectors. Here, I’m looking at two such pandemic performers that seem to me to be primed for growth for the next market recovery. I’m searching for ‘future-proof’ UK shares available at a discount and these two companies look like good picks for my portfolio.  

The future of grocery 

Ocado (LSE:OCDO) was a big pandemic winner. With people restricted indoors, this online grocer’s sales blew up. And while Ocado is still an online grocer, it has slowly transitioned into a tech company that sets up automated warehouses for other big chains. And its designs and workflow systems are backed by over 500 patents. 

The economic slowdown has caused many UK shares to fall from pandemic and post-pandemic highs. And Ocado shares, which rose 160% between February 2020 and February 2021, have fallen 69% since. In 2022 alone, the Ocado share price is down 45%. And there are some solid reasons behind this drop.

Ocado’s operations are very cash-intensive right now. The company has reinvested earnings and borrowed over £4bn since its initial listing. And just this week, it placed a further £575m of shares on the market, which added up to 9.7% of its share capital. Its huge R&D spending means the company has recorded pre-tax losses for two consecutive years.

But I’m still very bullish on this fast-growing UK share. It’s clear to me that automated warehousing is the future of e-commerce. And Ocado’s recent partnerships with grocery giants like Morrisons and Kroger back this up. The board expects steady revenue when warehouses that are still under construction start functioning. And its automation products saw a 301% jump in contracts last year. 

I believe its tech will become immensely valuable in the next five years. Ocado tops my UK shares to buy watchlist but the market is still volatile and I think the current bear run could present a better buying opportunity in the near future.

FTSE 100 darling

Equipment rental company Ashtead Group (LSE:AHT) was a big winner in 2020-21. Its shares jumped over 310% between March 2020 and December 2021. However, so far in 2022 they’re down 45% at 3,400p with a price-to-earnings ratio of 14.8 times. And I think the company is a bargain growth option at this price. 

It’s already the second-largest equipment rental company in North America and the largest in the UK. And being a construction service provider, Ashtead avoids the pitfalls of construction like fluctuating commodity prices and environmental factors delaying deliveries.

The company will have to deal with growing overhead and repair costs and its sizeable £5.8bn net debt. This could eat into future revenue given its high acquisition spending right now. But the business is a strong cash generator, bringing in £1.1bn in 2022. 

This business is on my UK shares buy list because of its steady growth strategy and huge market share in cash-rich regions. Ashtead addresses a very specific problem in the construction industry and I’m bullish on its business model. I’d be tempted to invest in the company once the larger global economic climate shows strong signs of recovery. 

The post Down 45%, are these UK shares no-brainer bargains right now?  appeared first on The Twelfth Magpie.

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Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has recommended Ocado Group. 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.

All this has put me on the lookout for some outstanding UK shares to buy on their way up. With £1,000 to invest in June, here are two companies I have identified for my portfolio showing signs of explosive growth over the next decade. 

Top UK share to buy in the energy sector

Multinational energy firm SSE (LSE:SSE) has been on a solid run in the market. Since the Russian invasion of Ukraine, renewable energy sources in the EU have gained significant prominence. And the SSE share price has jumped nearly 20% since. One-year returns stand at 16.8% and the share has gone up nearly 10% in 2022 alone.

After the recently released results, I think this UK share looks very attractive. For the financial year 2021-22 (ended 31 March 2022), the company recorded a 23% jump to £1.16bn in pre-tax profits from the year before. This jump allowed the board to roll out a £12.5bn investment plan to grow offshore wind assets by 2026.

SSE’s full-year dividend stands at 85.6p per share, which brings the current yield to 4.7%. And given the growing retail price of energy, the board expects a 5% year-on-year dividend until 2026.

While these are great indicators of financial strength, there are a few concerns to address as well. The company has a net debt of £8.59bn, which could affect future revenue. Also, given the increased interest in the field, better alternatives could become prominent over the next decade, which could force a restructure. 

However, the energy sector is growing fast. And SSE’s impressive recent financials and above-average yield makes it one of the top UK shares to buy right now for my long-term growth portfolio. I’d be tempted to make a £1,000 investment if the share price falls below 1,750p in June.

Global consumer goods giant

Unilever (LSE:ULVR) is a fast-moving consumer goods company present in over 100 countries with 400 popular brands in its portfolio.

With a turnover of over €1bn in 2021, the company retained a lot of the customers it gained during the pandemic-driven hygiene products boom. Customer surveys show that the demand for anti-bacterial cleaning products will remain high across the next decade. The average consumer cares a lot more about personal hygiene after the pandemic, which is great news for Unilever. 

Its significant debt of €25.5bn is a concern. And given the inflationary pressure in the UK right now, profit margins could take a hit affecting future revenue. But I think the company has a robust supply chain, product demand and pricing power to overcome this. And given the current volatile market conditions, I think my portfolio is screaming for a fundamentally strong company with a global presence right now. If Unilever’s share price falls below 3,500p, I would happily make a £1,000 investment this year.

The post 2 top UK shares to buy now with a £1,000 lump sum appeared first on The Twelfth Magpie.

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Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has recommended Unilever. 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.

A cyber-security firm

Darktrace (LSE: DARK) has had a mixed start to life as a public company. After soaring to around 1,000p, the UK share has since dropped back to under 400p. But after today’s excellent trading update, and some other recent positive developments, the shares have managed to climb back to over 500p. I think they can continue to soar.

Even as a current shareholder, the trading update exceeded my expectations. In fact, revenues in the six months to 31 December 2021 reached over $192m, over a 50% year-on-year increase. Even more impressive was the fact that the company saw an operating profit of over $8m, mainly due to the pandemic-related suppression of some key costs. This is a change from the consistent losses the company has been seeing. While I don’t believe this is a sign of consistent profitability, especially as the costs are likely to return soon, it’s still a promising sign.

Even more promising is the updated forward guidance. For FY22, the company now expects year-on-year revenue growth of over 45%, updated from previous guidance of 43%. The recent acquisition of Cybersprint should also boost revenues in the longer term.

There are a couple of risks that must be pointed out though. For example, it has a high valuation, with a price-to-sales ratio of around 10. This implies that revenue growth is already expected to be very high. Further, share-based compensation is expected to increase over the next year, potentially leading to share dilution.

Despite these risks, the potential of Darktrace certainly seems too strong to ignore. This is a UK share I’ll continue to add to my portfolio.

A packaging UK share

Mondi (LSE: MNDI) is a FTSE 100 share that has delivered consistent growth over the past few years, while also paying a sustainable, and fairly high, dividend. Its recent results also demonstrated its consistent growth.

For example, in 2021, revenues were able to grow 16% year on year to €7.7bn, while operating profits grew 23% to over €1bn. This gives Mondi a price-to-earnings ratio of just 11. Considering that it’s managing to deliver strong growth, this seems very cheap. It also raised its full-year dividend 8%, reaching 65 cents. This equates to a yield of around 4%, far higher than many other UK shares.

Even so, the current conflict between Russia and Ukraine is a severe problem for Mondi, because it has significant operations in both countries. In fact, Russian revenues equate to around 12% of the group’s total. Loss of these revenues would, therefore, have a significant impact on the Mondi share price. As such — and also for the sake of an end to the suffering — I hope that a ceasefire is not too far away.

Despite this risk, Mondi is not a Russian company and will not be targeted by western sanctions on Russia. It should be able to mitigate the impacts of the conflict through its other operations. This is why it remains a stock I’m happy to have in my portfolio.

The post 2 UK shares to buy today after excellent trading updates appeared first on The Twelfth Magpie.

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Stuart Blair owns shares in Darktrace and Mondi. The Motley Fool UK has no position in any of the shares mentioned. 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.

Investing via the stock market is often labelled as ‘risky’. But I’m happy to take that risk rather having a lot of my wealth sitting in a cash savings account. Allow me to explain why I’m buying UK shares.

Cash savings erode in value

Let me start by clarifying that I’m not against setting some money aside. I actually reckon this is very prudent. Having cash ready for replacing something that’s broken down in the house, for example, can take a lot of the sting out when it (inevitably) happens. 

Once I’ve reached a certain amount however, the benefits that come from keeping my wealth in this asset diminish massively. The reason for this is that inflation — the ‘silent killer’ of the financial world — gradually (or not so gradually) erodes the value of money.

Inflation isn’t always a bad thing. However, anyone with an eye on the headlines can’t have failed to notice the rising cost of living in recent months. In fact, inflation sat at 5.4% in December, far above the Bank of England’s 2% target. The state of affairs is even worse across the pond. At 7.5%, inflation in the US is now at its highest rate since 1982. 

Since any cash savings I have are now being  impacted, I think it’s wise for me to keep less money in the bank and more in the stock market. There are a few reasons for this.

Why I’d buy UK shares instead

First, equities have been shown to generate higher returns than all other traditional asset classes over the long term. So even though inflation may have the upper hand right now, this is unlikely to matter if I can lock my money away in the market for years (and ideally decades). True, past performance is no guide to the future, but nor is it completely redundant, in my opinion. 

A second reason relates to the valuation of stocks. Whether we attribute this to the pandemic, Brexit, supply chain issues and/or tensions between Russia and Ukraine, many UK shares are very reasonably priced at the moment. As Warren Buffett would attest, the best time to buy is when brilliant companies are on sale.

Third, owning UK shares gives me access to a source of passive income in the form of dividends. Yes, not every company returns a proportion of profits to shareholders. However, those that do can serve as a defence against rising prices.

Get personal

Of course, the above is conditional on me having already built up the aforementioned cash buffer. I’d also not want to be carrying any debt (aside from a mortgage). Yes, inflation is high, but the interest I’d be paying on credit cards is even worse.

It’s also worth bearing in mind that the specific UK shares (or funds) I buy will be dependent on a number of other factors that vary between investors. As someone in his early 40s, my portfolio may not have the same asset mix as someone in their early 20s, or a retiree.

Investing is very personal. Therefore, it’s vital to evaluate my own risk tolerance, financial goals and time horizon before I buy anything with the cash I move over from my savings account.

The post Cash savings accounts? I’d rather buy UK shares as inflation soars appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

An excellent half-year trading update

Vistry (LSE: VTY) has had an excellent 2021, in the context of record house prices and a strong economic recovery. Such strong demand has enabled the housebuilder to record half-year operating profits of £139.1m. This can be contrasted with a loss of £9.7m in the same period last year. But this isn’t the only positive.

In fact, the strong cash generation in the period resulted in a net cash position of £31.6m, compared to a net debt position of £357.3m. This strong liquidity has also allowed it to announce an interim dividend of 20p. For the future, it said that it would aim for the dividend to be twice covered by earnings, while excess capital would also be returned to shareholders. This seems extremely sustainable and should also lead to strong shareholder returns.

Despite this, I do have some concerns. For instance, due to the possibility that interest rates may rise, alongside the stamp duty holiday coming to an end, house prices may fall back. Further, Covid and Brexit-related workforce disruption, alongside the increasing cost of building materials, may also limit the number of houses that can be completed. This could also damage profit margins and is a factor affecting many other UK stocks right now.

But currently, rising house prices are still outpacing rising costs. And Vistry has pointed to “sustained demand”, despite the stamp duty holiday coming to an end. This means that full-year guidance has been raised to a pre-tax profit of £345m, giving it a forward price-to-earnings ratio of just under 10. This is the reason I bought Vistry shares.

This UK stock is upping shareholder returns

Aviva (LSE: AV) is the other UK share that makes up part of my portfolio and that I think is a no-brainer buy. This is due to its current strong financial performance, alongside the prospect of higher shareholder returns. In fact, in the first quarter of 2021, the insurance company reported underlying operating profits of £725m, up 17% year-on-year. This reflects extremely strong results, demonstrating that the company’s new strategy of focusing on the UK and Canada, is paying off.

But under activist shareholder pressure, Aviva has also announced plans to return £4bn to shareholders. This should be completed by the end of the first half of next year. It also includes a £750m share buyback and the possibility of a special dividend. The dividend is also expected to reach 25.36p per share by next year. This is equivalent to a yield of nearly 7%, far higher than other FTSE 100 stocks.

Although there is the tangible risk of a general economic slowdown, I feel Aviva’s positives outweigh the risks. Therefore, I think that Aviva is a no-brainer buy and I’ll buy more shares if it falls further.

The post 2 ‘no-brainer’ UK stocks I’d buy right now appeared first on The Twelfth Magpie.

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Stuart Blair owns shares in Aviva and Vistry. The Motley Fool UK has no position in any of the shares mentioned. 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.