With the start of summer, I am tempted to spend less time thinking about investing. But as news like the bid for Morrisons shows, this can still be a busy time of year in the City. So I’ve been thinking about UK shares to buy now and tuck away in my portfolio.
Here are five I am considering.
Photo-Me
Shares in Photo-Me are up 22% over the past year. I think there could be further upside.
I am not sure investors have fully appreciated the steps Photo-Me has taken to reshape its business. It has been busy during the pandemic getting rid of underused machines and optimising growing revenue streams like self-service laundry. While the demand for passport photos has slumped, the company’s expertise in identification documents still feels relevant. I expect it to find new revenue streams using its digital identification expertise.
Risks include low footfall near Photo-Me machines in many markets due to lockdowns. That could take a big bite out of revenue.
UK shares to buy now: Natwest
High street bank Natwest continues to attract my interest. As the government keeps selling down its stake, that opens up opportunities for the bank to repurchase and cancel shares. That alone could boost earnings per share in coming years.
I also think the company is poised to benefit from a stronger UK economy. In its first quarter results, the bank reported a pre-tax operating profit of £946m. I expect it to keep doing well as the economy recovers.
One risk is a fall in business borrowing by already overstretched customers. That could show up as smaller revenues. While customer deposits grew in the first quarter compared to the fourth quarter of last year, net lending fell slightly.
Babcock
I continue to see value in Babcock despite a lack of investor enthusiasm for the defence contractor lately.
With strong customer relationships, a disposal programme aimed to streamline operations, and a host of long-term contracts, I think Babcock has value. I see these as UK shares to buy now for my portfolio. The business is in a recovery period, but liquidity is sufficient. A risk with Babcock is that future profitability is reduced when the current management revises the company accounting policies.
JD Sports
I’d be happy to buy JD Sports shares for my portfolio and tuck the shares away. The current Euros enthusiasm could boost sales. But more importantly, I think the company’s proven retail formula and international reach could help to grow sales for many years. I also like how JD’s offering spans different price ranges. That allows it to retain customers even as their incomes and spending habits evolve.
A risk is the rise of online competitors which could lead to lower profit margins.
M&G
The final name of my list of five UK shares to buy now for my portfolio is investment manager M&G.
With a market capitalisation in excess of £6bn, this is a large financial services provider with a well-known brand. Yet it yields 7.6%. That could provide me with some welcome passive income.
One risk with M&G is its heavy UK exposure. Any economic downturn in the UK could hurt demand and dent revenue.