If I had £2k to invest today, I’d want to buy UK shares that are positioned to profit from the economic recovery.
Here are two stocks that I believe meet this objective.
UK shares to buy
The first company on my list is the financial services group IG Group (LSE: IGG). I think this business should profit from two tailwinds as we advance.
First of all, economic growth could translate into higher company profits, which might justify more stock market trading, especially in UK shares. At the same time, economic growth may leave consumers with more discretionary income. This could also lead to more investment and trading activity.
As well as these tailwinds, IG is also using its financial firepower to expand overseas. As a result, bolt-on deals may help boost the group’s overall growth.
That said, by expanding overseas, the company risks entering markets it does not understand. This could lead to losses and write-downs on the acquisitions. Moreover, in the worst-case scenario, IG could fall foul of regulators, which may have negative repercussions.
Despite these risks, I think the company is one of the best UK shares to buy today due to its exposure to the global economy. As such, I would buy IG Group for my portfolio. The stock also currently offers an attractive dividend yield of 5%.
Booming demand
The other company I would buy for my portfolio of UK shares is the iron ore mining giant Rio Tinto (LSE: RIO). As the global economy has started to open up after the pandemic, countries worldwide have unleashed colossal economic stimulus plans to try and rekindle growth.
As a result, the prices of essential commodities such as copper and iron ore have skyrocketed. This has been great news for iron ore producers like Rio, which has some of the lowest production costs in the world.
I think this implies the company is on track to report outstanding profits this year. In the past, the business has returned exceptional profits to investors through special dividends.
While past performance should never be used as a guide to future potential, this suggests that management could reward shareholders if the company does earn exceptional profits in 2021.
Unfortunately, commodity prices are incredibly unpredictable. As such, while Rio might be on track today for a record performance this year, that could change quickly. And if the price of iron ore completely collapses, the company’s profits could turn into losses. Most UK shares are not exposed to this kind of risk, which means this investment may not be suitable for all.
However, despite the enterprise’s risks, I would buy the stock for my portfolio of UK shares today, considering its income and growth potential. I think the company could be one of the best ways to invest in the global economic recovery over the next few years.