Sometimes I have to stop myself from reading the news, especially when it relates to the dreary outlook for the UK economy. Sure, we aren’t in the middle of a boom period. But this doesn’t mean some companies can’t outperform in this environment. Here are some top UK stocks that have done just that recently and that I’m thinking of buying.
Oil power duo
Two standout performers have been from the oil sector. BP (LSE:BP) shares are up 54% in the past year, with Shell (LSE:SHEL) topping the FTSE 100 chart with an impressive 61% gain over the same period.
The main reason for the move higher in both stocks has come from the price of oil. For example, a year ago the price of Brent Crude was around $72 per bbl. It’s now at $90 and spent a good portion of H1 above $100.
This has been great for the oil majors, which can benefit from a higher price for the oil extracted. The risk is that this is a temporary blip, given the disruption of supply caused by the Russia-Ukraine crisis. Yet although I agree on the root cause, I don’t think that the price of oil is going to materially head lower over the next year.
The rebound in demand from the pandemic means that there’s a higher base level now, including everything from airlines to haulage companies. Further, a bear market for stocks and bonds doesn’t necessarily follow through to a commodity like oil. This is because it’s a tangible asset that actually gets used, meaning that the supply is constantly required.
On that basis, I think both oil stocks could outperform over the next year. With free cash, I’d be keen to add both to my portfolio.
Top UK insurance stock
Another company that has outperformed in the past year is Beazley (LSE:BEZ). The FTSE 250 specialist insurer has experienced a jump in its share price of 60%.
The business services a broad range of areas, including marine, aviation and cyber security. As such, the diversification achieved helps to ensure that it has demand from the businesses it services. In the recent half-year results, it achieved the best combined ratio figure since 2015.
The combined ratio is a profitability measure that’s mainly used in the insurance sector. It takes into account underwriting losses, expenses and other factors. Ultimately, if the percentage figure is above 100 it’s a bad thing, with anything below 100 being good. The latest figure for Beazley was 80%.
I think that this UK stock can continue to move higher even during an economic downturn. Insurance is a stable sector, with many businesses needing to take out insurance products as a priority. If companies go bust during a recession then there’s a risk of lower demand and some default risk on the policies taken out. However, I don’t see this as a huge issue overall, so am looking to buy the stock with free cash.