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UK shares to buy now: 2 I’d choose

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Christopher Ruane
·3-min read
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Preparing a budget during a pandemic
Preparing a budget during a pandemic

I’ve been looking for ways to deploy a little spare cash. Scanning the markets for UK shares to buy now, below are two I’d consider buying.

I explain why I like the shares. I also mention why I’d act now on these possible investments, rather than wait.

A global giant

When hunting for shares to buy, I often draw inspiration from investing guru Warren Buffett.

From its collection of well-known brands to its strong cash generation, Unilever (LSE: ULVR) demonstrates many of the characteristics of the types of business Buffett loves to own. In fact he tried to buy the company in 2017. That bid valued the company at around £115bn.

Today, Unilever’s market cap is under £107bn. In other words, I can buy a slice of the company on the stock market cheaper than Buffett offered to pay four years ago!

Since then, not everything has gone in the company’s favour. Its international exposure means sterling weakness can work against it. While the pandemic has seen some cleaning brands boom, Unilever’s diversified portfolio means it has seen less consistent growth. Its home care divisional revenue actually slipped 0.6% last year, for example.

Long-term prospects

So why would I choose these as UK shares to buy now for my portfolio? I think the broad mix of brands at different price levels will help the company continue to ride the wave of economic growth in markets like China and Indonesia.

The shares have only added 3% in the past year. They’re more than 15% down from where they stood in October before vaccines were approved.

I think that sell-off has been overdone. Unilever’s prospects look bright to me regardless of how or when the pandemic dies out.

I’d pick these UK shares to buy now

I’d also consider Victrex (LSE: VCT). This chemicals producer has a business moat thanks to its specialist technology. For example, its range of “PEEK” polymers is the market leader and has applications across a range of industries. The manufacturer’s output has global appeal, which explains why Victrex exports 98% of all production.

Last month, it reported first-quarter results. Revenue was up 1% on the prior year.

The company’s highly cash generative business model means it doesn’t carry any long-term debt. In fact, it had £84m of net cash at the end of the year. Some of that is ringfenced for expansion in China. The company plans to spend heavily this year on facility construction there. That costs money, although hopefully it will aid future growth.

Although 2021 has started well, the company warned it still expects to turn in a weaker performance in the first half overall than it managed last year. That may help to explain the 11% drop in the share price so far this year. Any further demand drops could dent the share price more.

The current price-to-earnings ratio of 33 still looks high to me. But the company has a sustainable competitive advantage and diverse end markets. Longer term, the shares are up 9% over the past year.

That’s why I see them as UK shares to buy now. The recent share price drop has created a more agreeable entry point to what I see as a quality buy-and-hold pick.

The post UK shares to buy now: 2 I’d choose appeared first on The Motley Fool UK.

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christopherruane owns shares of Unilever. The Motley Fool UK has recommended Unilever and Victrex. 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