If I had £3,000 to invest right now in UK shares, where would I start?
£3,000 is enough to lower my risk by investing in a diversified range of companies and sectors. I’d consider putting £1,000 into each of the shares below.
Growth choice
Over the long-term, I expect the UK self-storage industry to experience substantial growth. Rising house prices mean space is at more of a premium than ever. Former generations had spare rooms in which to hoard junk. But many households today have less space – and more junk!
The storage industry has a simple business model. But it has some qualities I appreciate. Once people put goods in storage they often leave them there for years. Meanwhile, storage companies such as Safestore keep getting paid without having to do much work, beyond providing and maintaining the storage space.
A risk I see here is that a future fall in demand for self-storage could hurt turnover and profits.
The shares are up 43% in a year. I expect strong future storage demand. I would consider these as a buy and hold option for my portfolio.
Dividend pick among UK shares
In its interim results today, tobacco company Imperial Brands provided some reassurance that its recent strategy revamp could help revive its fortunes. Revenue was up 6% and basic earnings per share leapt 244%. Even with a weak comparative period last year, I see that as encouraging.
The company grew its dividend 1%. That is bittersweet, given the large dividend cut last year. But it is a statement of intent that the company is committed to raising dividends again. The return of a progressive dividend policy makes these UK shares more attractive for my portfolio. I would consider buying more today thanks to the income generating potential of the 8.5% yield.
Dividends are not guaranteed, however, as last year’s cut reminded shareholders. I see a risk here if Imperial’s strategy to focus more on cigarette sales in key markets flops amid the structural decline of cigarettes. That could harm its ability to pay dividends.
ESG shares
For my third pick I would consider a share I think could benefit from the rise of a thematic approach to investing.
Environmental, social, and corporate governance or ‘ESG’ shares have been a popular pick for some investors lately. Trying to help the planet and profiting from it at the same time sounds attractive to me. But personally I always consider a company’s investment potential, not just its ESG attributes.
That’s why I’d consider putting my final £1,000 into Unilever. The consumer goods manufacturer has a range of brands and global reach. That helps it to generate substantial revenues. Last year, revenue topped €50bn. Basic earnings per share of €2 and a 3.5% dividend yield bolster the appeal of these UK shares for my portfolio.
Unilever is vocal about its environmental agenda. Examples include its use of sustainable palm oil and its collaborative approach enabling smallholders to farm sustainably. For a consumer facing business like Unilever, such a green agenda could actually boost its product appeal.
Then again, there is a risk that environmental pressures cut demand for a consumerist lifestyle. That could damage sales for Unilever, whose revenues are already down compared to three or four years ago.