AJ Bell investors are buying these UK stocks! Should I join in?
The panic engulfing global stock markets continues to grow. Yet some UK stocks continue to attract lots of attention from bargain hunters.
Here are two London Stock Exchange companies that AJ Bell customers have been buying. Should I snap them up myself?
Lloyds Banking Group
There’s a lot to like about Lloyds Bank (LSE:LLOY) on paper. The business trades on a forward price-to-earnings (P/E) ratio of seven times. It also carries a 5.8% dividend yield.
This perhaps explains why the FTSE 100 bank is the second-most popular among AJ Bell investors in the seven days to 15 March. It’s accounted for 8.1% of all buy orders in that time.
I’m not tempted to buy Lloyds despite its cheap share price, though. And it’s not just because fears are rising over a meltdown in the entire banking industry. In fact this bank’s low exposure to riskier assets assuages my fears of a crisis here.
I’ve long fretted about the company’s lack of exposure to overseas markets. With the British economy facing a prolonged period of weak growth, Lloyds could struggle to generate decent long-term earnings.
I also worry about the impact of rising competition from challenger banks. The likes of Starling Bank and Monzo are rapidly eating into the market shares of the high street banks with their better savings and loans rates and superior online platforms.
Higher interest rates could continue to boost Lloyds’ bottom line. Bank of England policy tightening pushed Lloyds’ underlying net interest income an impressive 18% higher in 2022, to £13.2bn. But on balance I think there are better UK stocks to buy right now.
I would, for example prefer to snap up shares in green power producer SSE (LSE:SSE) today. Even if the global economy falls off a cliff, this UK stock can expect earnings to remain broadly stable. This explains why its share price has also remained stable despite the broader market carnage of recent days.
Demand for electricity remains basically unchanged during economic upturns and downturns, after all. But this isn’t the only reason I’d buy it today. As a long-term investor I’m drawn by the huge growth potential of renewable energy providers like this.
Wind energy providers like SSE will play an important role in helping the UK hit its net zero emissions targets. This means that, even if adverse weather conditions damage profits now and again, over a longer time horizon earnings here could balloon.
I like this FTSE 100 operator too as it speeds up investment in its green operations. It has plans to increase its renewable energy output by five times by the end of the decade. Its ability to hit this target is boosted following Ofgem’s decision in December, too, to accelerate linking up offshore wind assets to the country’s electricity grid.
SSE shares accounted for 7.5% of all buy orders made via AJ Bell in the past seven days. I think its bright long-term outlook — allied with its chunky 5.5% forward dividend yield — makes it a top buy right now.
The post AJ Bell investors are buying these UK stocks! Should I join in? appeared first on The Motley Fool UK.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group Plc. 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.
Motley Fool UK 2023