UK shares have had a volatile year. The Covid-19 pandemic has destroyed some sectors while bolstering others, and overall many stocks have rebounded from their March lows. However, the future still looks uncertain. It’s difficult to know which UK shares look a good long-term investment. Some, I’ve recently considered include IQE, Panoply and Tesco, Today I look at a few other options.
Indivior share price plummets
The Indivior share price came crashing down today. The company is now worth around £600m; it has a price-to-earnings ratio (P/E) of 6 and earnings per share (EPS) are 13p. Reckitt Benckiser Group (LSE:RB) has submitted a claim against Indivior for over £1bn. The Indivior share price plummeted more than 33% as a result. The two companies de-merged back in 2014, but there was a clause that was never ironed out and now Reckitt wants its dues.
Indivior is claiming it’s not as serious as it sounds, but investors are sceptical. The company already paid $600m in July to resolve fraud charges related to its opioid medication Suboxone. Prior to that it was caught up in a patent battle with Indian pharma firm Dr Reddy’s Laboratories. I will not be rushing to buy shares in Indivior.
Does Reckitt Benckiser look a better buy?
The Reckitt Benckiser share price reached a high of more than £80 per share back in 2017, but since then it’s endured an extremely volatile time. Its low point came in March this year when it was trading around £51, but it then made a spectacular recovery and by July was over £80 a share again. Unfortunately, this was short-lived and today Reckitt is trading under £65 per share.
The FTSE 100 consumer goods giant sells a lot of popular health and hygiene products. But some believe they will be out of favour once the pandemic is behind us. Positive vaccine sentiment has pushed the Reckitt Benckiser share price back down in recent weeks, but its chairman took this opportunity to buy shares. I think this is a good long-term investment and would be happy to buy.
Buying UK shares via an investment trust
Another way to invest in UK shares is to buy shares in an investment trust or fund. Many of the high performing funds and trusts tend to hold US equities and some specialise in specific areas such as renewables, tech, or commodities.
One investment trust that contains several UK shares is the Merchants Trust (LSE:MRCH). Considering some UK businesses have struggled through the pandemic, it’s not a complete surprise that the Merchants Trust hasn’t had a great year either. It has a high exposure to stocks in troubled sectors such as aerospace, travel, and leisure.
The FTSE All-Share constituent has seen its share price slide 25% year-to-date, with considerable volatility in between. After rising on the wave of positive sentiment brought by vaccine news, its share price is slipping again.
The Merchants Trust has a price-to-earnings ratio of 14, earnings per share are 29p and its dividend yield is an impressive 6%. Its estimated net asset value (NAV) is £4.17, which means it’s trading at a 1.5% premium today. Its dividend is attractive, but how well it can recover in the next year remains to be seen. With the pandemic raging on, I’m not yet tempted by these sectors and think there are more attractive investment trusts to put my money in.
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Kirsteen 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.
Motley Fool UK 2020