The recent stock market correction led to many shares dropping in value. Since then, I’ve been on the lookout for the best UK shares to bolster my holdings. I believe I’ve identified two picks.
UK shares at the forefront of digital solutions
Kainos (LSE:KNOS) provides digital technology solutions to help organisations and their people to work smarter, faster, and better. The software firm can count many government departments among its customers, including the NHS. As well as the public sector, it also provides services to many private sector clients across multiple industries.
The Kainos share price looks good value for money to me right now. The shares are trading for 1,303p currently, but were 12% higher this time last year. More tellingly, the shares are down over 30% year to date. I’m considering buying the dip.
One of the primary risks to Kainos’s growth is the spectre of cyber security threats. Any breach could lead to huge financial and even legal consequences, especially as it helps those government departments with day to day operations.
Kainos shares pay a dividend with a yield of just under 2%. UK shares that help me build a passive income stream are an attractive prospect. And this one has a consistent track record of performance with clear evidence of growing revenue and profit consistently.
Most importantly for me, Kainos operates in a growth sector. The rise in technology adoption has led to lucrative opportunities for businesses like this.
Pick #2
Softcat (LSE:SCT) is an IT infrastructure specialist that sells the products of tech giants who don’t sell directly to businesses. It resells these products and services to public and private sector businesses across cyber security, IT intelligence, hybrid infrastructure and digital workspace tools divisions.
Softcat shares are trading for 1,513p as I write. They’re down 20% over a 12-month period from 1,897p. It’s one of a number of UK stocks in the tech sector that have seen share prices drop.
The valuation still looks a bit high to me with a price-to-earnings ratio of close to 29. If performance and growth ahead were to be affected, the shares could struggle. Furthermore, the IT reseller market is large and saturated. This competition could affect performance and returns.
Like Kainos, Softcat operates in a growth sector with numerous opportunities it can capitalise upon to boost performance and its bottom line. Its growth to date has been excellent and has been underpinned by consistent improving performance year-on-year. I do understand the past is not a guarantee of the future, however.
As a bonus, Softcat shares pay a dividend with a yield of close to 3%, which would help me boost my passive income stream.
What I’m doing now
I’d add Kainos and Softcat shares to my holdings at current levels. The primary factor is that both businesses operate in a growth sector. Furthermore, both pay dividends to boost my passive income stream.
I believe both of these stocks are top UK shares that would enhance my portfolio. And the recent stock market correction has thrown up many opportunities, so I will continue hunting as well.