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UK shares to buy now: 3 I think can double my money in 3 years

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Christopher Ruane
·3-min read
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Chart displaying growth
Chart displaying growth

Some UK shares doubled over the past year. That partly reflects their low starting point after the stock market crash last March. But I’ve been thinking about how I might double my money in coming years, starting in today’s market. I’ve picked some UK shares to buy now I think might double my money over three years.

A banking pick

Shares in Lloyds Banking Group (LSE: LLOY) have been strengthening already. Money invested at the start of 2021 would already show a 20% capital gain.

But I expect the shares to increase further. Lloyds’ profit last year fell sharply – but it still made a profit. Given the tumult in the economy I reckon that underlines the attractiveness of its focus on domestic banking.

Positively, Lloyds has restarted dividends. These remain constrained by regulatory limits. The bank plans to return to a progressive dividend policy when it can. Meanwhile, it continues to accrue excess capital. It could choose to return this as dividends. Between an improving business outlook and positive dividend news, I expect investor sentiment about Lloyds to improve. I see them as UK shares to buy now for my portfolio.

Risks include any downturn in the housing market or general economy, given Lloyds’ heavy mortgage exposure.

High yield with growth

Another name I think could double my money in three years is British American Tobacco (LSE: BATS). The shares currently yield 7.6%. Collecting dividends for three years at that level would already offer a total return close to 22%. However, dividend maintenance is never guaranteed. BAT faces challenges including a decline in smoking in key markets and an adjusted net debt close to £40bn.

If BAT shares can hit their 2017 peak again at some stage over the next three years, they would trade for double today’s price. With the dividend return, I would hopefully only need an 80% rise to double my money.

That still sounds steep! But I would pick them as UK shares to buy now because they seem undervalued. Admittedly the price is hardly changed from a year ago, showing just a 1% increase. But the business is performing well: reported profit from operations rose 10.5% last year and adjusted free cash flow after dividends was up 32.7%. I think the name is overdue a rerating.

UK shares to buy now for digital exposure

Digital agency S4 Capital (LSE: SFOR) released its annual results yesterday. Like BAT, the company has performed well despite the pandemic. Organic revenue growth was 15%. Acquisitions lifted the total revenue growth to 59%. Another acquisition was announced, of the agency Jam3.

Growth is welcome but profitable growth is even better. The basic loss per share narrowed from 2.7p to 0.8p. Scale and a growing reputation should help earnings improve, in my view.

The shares broke 500p on the results, but that only got them back to where they were last month. I think the market continues to undervalue the agency’s massive potential. Its global reach and talent base are impressive.

Risks include the preponderance of competing digital agencies. S4 Capital also seems heavily reliant on the drive of Sir Martin Sorrell. Any reduced involvement from him could damage confidence.

The shares more than doubled last year and I think they could do the same in the next three years if not sooner.

The post UK shares to buy now: 3 I think can double my money in 3 years appeared first on The Motley Fool UK.

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christopherruane owns shares of British American Tobacco, Lloyds Banking Group, and S4 Capital plc. The Motley Fool UK has recommended Lloyds Banking Group. 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