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FTSE 100 watch: 5 UK shares I’d buy now to achieve financial freedom in the new bull market

Peter Stephens
·3-min read
Couple relaxing on a beach in front of a sunset
Couple relaxing on a beach in front of a sunset

The FTSE 100 has risen by around 13% in the past two months. This has sent many UK shares soaring to higher price levels, as investor sentiment has gained momentum following positive news on vaccines.

However, there are still a number of companies that appear to offer good value for money. They may face uncertain operating conditions in the short run, but could deliver long-term growth as the economy recovers.

Value for money within the FTSE 100

A number of UK shares in the FTSE 100 could offer wide margins of safety at present. For example, the current valuations of commodity-related stocks, such as BP and Rio Tinto, indicate potential for long-term capital growth.

The dividend yields of both BP and Rio Tinto are expected to be over 6% for the current financial year. The companies may benefit from an improving global economic outlook. This, in turn, could lead to rising demand for oil and gas, as well as iron ore and other commodities.

Certainly, in the short run, BP and Rio Tinto are likely to be riskier investment propositions than other UK shares. However, they both have margins of safety, solid financial positions, and status as likely beneficiaries from a global economic recovery. This could allow them to outperform the FTSE 100 in the coming years.

UK shares with market opportunities

Other UK shares, such as Tesco and Kingfisher, may be in good positions to capitalise on changing industry trends. Their investment in online sales over recent years seems to be paying off, with many shoppers now focusing their spending on websites rather than stores.

Both stocks could also gain favour among FTSE 100 investors. Some investors appear to be viewing the pandemic as a step-change in consumer behaviour that could last over the long run. As such, they are favouring online-focused businesses, or at least those companies with major online advantages over rivals. This may mean that they can achieve higher ratings that lead to higher share prices over the long term.

Meanwhile, other UK shares such as Unilever could be well placed to outperform the FTSE 100 because of a focus on sustainability. A green recovery from the current economic crisis seems relatively likely, which may prompt a greater sense of awareness among consumers regarding the environmental impact of everyday products. Unilever has continually invested in the environmental aspects of its products, such as through aligning them with charitable causes. This may broaden their appeal in the coming years.

Outperforming the stock market

Of course, the FTSE 100’s uncertain near-term outlook may mean that many UK shares experience volatility in 2021. However, I think that buying high-quality businesses at low prices and holding them for the long run could lead to greater financial freedom as the current bull market gains momentum.

The post FTSE 100 watch: 5 UK shares I’d buy now to achieve financial freedom in the new bull market appeared first on The Motley Fool UK.

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Peter Stephens owns shares of BP, Rio Tinto, Tesco, and Unilever. The Motley Fool UK has recommended Tesco and 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.

Motley Fool UK 2021