UK shares to buy now: my top 2 stocks

As the outlook for the economy improves, I’ve been adding to my holdings of UK shares. Here are two companies which have attracted most of my attention. 

UK shares to buy

The first is insurance group Admiral (LSE: ADM). I’ve owned this stock in my portfolio for several years and I’ve been adding more recently. 

There are two reasons why I think this company is incredibly attractive as an investment. First of all, it’s one of the UK’s best and most efficient insurance companies. It’s a household name and can process customer queries at a lower cost than any other business in the sector. This is a considerable competitive advantage. 

Secondly, a few years ago, the organisation started to build out its international businesses in Europe and the US. For the past few years these businesses lost money. However, that changed last year. These operations started to contribute to the group’s overall bottom line in 2020. I’m expecting further growth in the years ahead. 

I think this international growth, coupled with its existing UK presence, will help drive Admiral’s dividend and earnings growth in the years ahead. At the time of writing, the stock supports a dividend yield of around 5%. This is based on City analysts estimates, which are subject to change. 

The most considerable risk facing the business is competition. The UK car insurance market is viciously competitive. Admiral has managed to navigate these challenges so far, but that doesn’t mean it’ll continue to do so as we advance. The company may also face challenges from regulators, which could lead to increased costs and reduced profits.

Nevertheless, despite these risks, I’d buy more of this stock for my portfolio of UK shares today. 

Income champion 

The second company I own in my portfolio of UK shares is the Law Debenture Trust (LSE: LWDB). There are two parts to this business. There’s an investment trust and an operation that provides administrative services to other businesses. This second business has historically provided a steady income allowing it to reinvest in its trust and support the dividend.

This was especially important last year. Income from Law Debenture’s professional services business could offset dividend cuts from stocks held in the firm’s investment trust. This allowed management to maintain the dividend for the year as a whole. 

I think this business model provides the best of both worlds. That’s why I own the stock.

However, the company isn’t without its risks. Professional services is a competitive business, and Law Debenture can’t take its position in the market for granted. Its investment managers have also borrowed money in the past to invest in UK shares when prices are depressed.

This strategy has produced results historically, but there’s no guarantee it’ll continue to do so. Borrowing money to invest in the stock market is a precarious strategy. 

Despite these challenges, I’ve bought Law Debenture as a diversified income investment.