After the stock market crash earlier this year, some UK shares have rebounded while others have underperformed. This ‘K-shaped’ recovery – where some businesses thrive while others decline – is a trend that I expect to persist for a while.
With that in mind, here’s a look at three stocks I’ve bought in the last month in an effort to position my portfolio for this type of recovery.
Hygiene specialist
First up, Reckitt Benckiser (LSE: RB). It’s a leading consumer goods company that owns a world-class portfolio of health and hygiene brands including Dettol and Lysol – the number one disinfectant brand in the US. I’ve owned Reckitt Benckiser stock for a few years now but recently added to my position near the 7,500p mark.
The reason I bought more RB shares is that I expect hygiene to be a big theme globally for at least a few years, due to Covid-19. As the owner of the largest portfolio of surface disinfectant brands, I think the company should outoutperform. Additionally, I was impressed with half-year results. For H1, net revenue was up 10.8% while adjusted earnings per share increased 14.5%.
Reckitt Benckiser shares are not particularly cheap. Currently, the forward-looking P/E ratio is about 23. I’m not put off by that valuation though. I think this defensive UK stock deserves a premium valuation.
Digital champion
Another stock I’ve bought recently is Softcat (LSE: SCT). It’s a FTSE 250 technology company that helps businesses with their IT needs. Cybersecurity, cloud, data, work-from-home solutions… Softcat can take care of it all. I first bought some shares in Softcat last year near 970p. I added to my position around the 1,330p mark.
The reason I’ve bought more SCT is that I expect digital transformation to be a massive theme in the years ahead. Covid-19 has shown just how important it is for businesses to be truly digital now. I see Softcat as well placed to benefit. I was also impressed by a recent trading update. The company advised that it has delivered an operating profit for the full year slightly ahead of its expectations and that it plans to resume its dividend soon.
Softcat is another UK stock that isn’t particularly cheap. Its P/E ratio is in the mid-30s. The lofty valuation doesn’t phase me, however. This is a company with serious growth potential, in my opinion.
Work-from-home stock
Finally, I started a small position in Gamma Communications (LSE: GAMA). It’s a leading provider of communications services. This is a stock I’ve been bullish on for ages. Finally, I pulled the trigger and bought near 1,600p.
There are a few reasons I like Gamma. Firstly, I see it as a good way to play the ‘work-from-home’ theme. Gamma’s solutions help businesses enable their employees to work remotely. Secondly, the company has a great growth track record. Over the last five years, revenue has climbed 90%. Third, Gamma is very profitable. Over the last three years, return on capital employed has averaged 24%.
Gamma issued a good trading update in July. It said that it expects EBITDA and earnings per share for the full year to be ahead of consensus.
GAMA shares trade on a forward-looking P/E of about 32. That’s not cheap. But this is a highly profitable company with significant growth potential. So, I think the valuation is fair.