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UK shares to buy now: here’s what I’d do with a £500 investment

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Andy Ross
·3-min read
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The UK national flag in front of Canary Wharf skyscrapers where professionals trade shares for a living.
The UK national flag in front of Canary Wharf skyscrapers where professionals trade shares for a living.

,With the UK stock market still looking cheap versus the US, and with many industries like banking that dominate the FTSE 100 set to recover this year, I’m looking at the UK shares to buy now for my stocks and shares ISA.

One of my UK shares to buy now

The first stock I’d potentially add to my portfolio is Lloyds Banking Group (LSE: LLOY). Its shares seem well poised to benefit from the economy reopening and growing this year, as we bounce back from the pandemic. On top of that, Lloyds’ shares seem to have momentum, as investors increasingly look for value stocks.

The share price is still down on where it was pre-pandemic. I also like that it’s a known banking brand, has got scale in the UK and under the current chief executive has been expanding into higher-margin areas of work, such as wealth management and credit cards.

On the other side of the coin, the Lloyds share price is closely tied to perceptions of the UK economy. It’s also not very diversified, unlike Barclays or some European or US banks. By that, I mean it’s a retail bank with no investment banking to diversify earnings. Also, some might be tempted to think the business model faces disruption from fintech. That risk in turn could hold down banking share prices.

Lastly, CEO António Horta-Osório is leaving after a decade at the helm, which could be a positive or a negative. It may allow Lloyds to pursue a new strategy. That might deliver more value for shareholders, or it might see someone less capable than Mr Horta-Osório take over. Time will tell.

Overall I’m thinking about adding Lloyds shares to my portfolio as the economy recovers from Covid-19. The timing, as we recover from the pandemic, could make it a great share for me to buy now.

A share in a more high growth industry

The second UK share I’d consider buying now for my portfolio is Tritax Big Box REIT (LSE: BBOX). The warehousing company provides the warehouses that the big e-commerce companies need as part of their logistics.

This means there’s growing demand for warehouses. On top of that, in many markets, including the UK, there is still plenty of room for e-commerce to keep growing.

Specifically when it comes to Tritax as a UK share to buy now, what I like is its solid track record, and profitability. For me, that makes the shares worthy of consideration for my portfolio.

I’ll need to be wary, though, of the potential downsides – which include competition, given it’s a growing market. That could lead to pricing pressure.

There’s also not a lot of dividend growth and the REIT structure lacks flexibility. What I mean by that is REITs have to pay out 90% of income as a dividend, which I think makes them vulnerable to cuts if markets worsen. That’s the opposite of investment trusts. They can hold significant reserves to pay investors dividends, even if income drops.

Overall on the balance of risk versus reward, I’m thinking Tritax Big Box REIT looks like it could add growth and income to my portfolio.

When I next have some cash in my portfolio, I’d likely be tempted to buy shares in UK banking giant Lloyds Banking Group or Tritax Big Box REIT.

The post UK shares to buy now: here’s what I’d do with a £500 investment appeared first on The Motley Fool UK.

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Andy Ross has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays, Lloyds Banking Group, and Tritax Big Box REIT. 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