Yahoo Finance If I started investing in UK shares today, I’d snap up these two defensive gems!
I don’t have a DeLorean, but if I could go back in time and apply what I know about investing now, I’d buy different UK shares to what I did then.
Let me explain how I’d approach things differently, and break down two picks I’d buy today if I was just starting out.
Quality over quantity
I wouldn’t go as far as saying that I was naive when I started investing. However, I was far less experienced. I’m not willing to admit how long ago that was, as I’d be giving away my age.
However, at that time, I used to think more was better, but I did understand the need for diversification.
One thing I’m happy to admit I didn’t truly grasp was the need to invest in stocks with defensive traits.
With that in mind, I’d happily buy shares in Premier Foods (LSE: PFD) and National Grid (LSE: NG.) if today was the start of my investing journey.
Food and energy are basic human neccessities. This means that no matter the economic outlook, earnings and returns prospects should, in theory, stay pretty robust.
Premier Foods is the owner of many of the nations favourite brands, including some of my own.
National Grid is the sole owner and operator of the electricity transmission system in the UK. It is tasked with ensuring we all get energy to our homes.
The good stuff
Starting with Premier Foods, the business’ growth, track record of performance, as well as future prospects all look good to me.
The business has grown revenue and profit in recent years, and managed to maintain a healthy balance sheet too. However, I do understand that past performance is not a guarantee of the future.
Next, the business has garnered excellent brand power, and expanded into international markets. This is a big part of the reason why the business has done so well in recent years.
Finally, the shares still look decent value for money on a price-to-earnings ratio of 12. Plus there’s a small dividend yield of 1% that could grow in line with the business. However, I do understand that dividends are never guaranteed.
As for National Grid, the business has a monopoly on its operations. This is a major draw for me, as a lack of competition can mean stable earnings and returns.
It has been seen as a dividend stock for many years, and has delivered too, in my view. At present, a dividend yield of 6.4% is attractive. Plus the shares are dirt-cheap if you ask me on a P/E ratio of just 10.
Risks and summary
For Premier Foods, food price inflation is a worry. The current cost-of-living crisis has led many consumers to move away from premium brands like the ones Premier manufactures and sells, and towards non-branded essentials. If this continues, earnings and returns could be dented.
As for National Grid, there is a chance that the government could intervene to curb investor returns. Plus, hefty investment will be needed to transition the current grid towards renewable energy. This could also impact returns in the long term.
To summarise, these two picks could be great starter stocks to consider for investors who are starting their journey today. I know if I was, I’d buy these two in a heartbeat, if I could.
The post If I started investing in UK shares today, I’d snap up these two defensive gems! appeared first on The Motley Fool UK.
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Sumayya Mansoor 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.
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