UK investing: I think these are the best shares to buy now

Below are two companies I believe are the best shares to buy now for a UK investing strategy. Despite the challenges these organisations may face, I think their size and diversification will help them navigate the uncertain economic environment the world currently faces. 

The best shares to buy now

The coronavirus pandemic has impacted every single business in the world. Some companies have suffered significantly and many have collapsed. However, others have grown as the world has adjusted to the new normal.

In particular, one sector that’s seen a significant revival is the commodities industry. Heading into 2020, the outlook for commodity prices was pretty stable. Analysts didn’t expect a significant increase or decrease in demand and prices. That all changed as the year progressed. Initially, commodity prices slumped, but they quickly recovered. 

Two factors have pushed prices higher. Rising demand as countries such as China unleashed massive economic stimulus plans to restart economic growth after the pandemic. The other is supply constraints. The pandemic has caused disruptions in global supply chains, and social distancing has reduced production facilities’ productivity.

These twin headwinds have resulted in higher prices. For example, the price of iron ore, a key ingredient in steel, is up 88% over the past 12 months.

Booming commodity prices have resulted in significant profits at my best shares to buy now, Glencore (LSE: GLEN) and BHP (LSE: BHP). 

UK investing strategy

Results from both of these businesses, released earlier this week, showed the impact the commodity boom has had on their finances.

Glencore reported that adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) hit $11.6bn in the year to December. That was about $1bn higher than market expectations. The group’s marketing arm, which shifts commodities around the world, achieved a record performance. It reported EBITDA of $3.3bn. 

With profits surging, the group has reinstated its dividend payout. It now intends to distribute $0.12 (8.6p) per share for its current financial year, returning a total of $1.6bn. 

At the same time, BHP announced a record $5.1bn interim dividend as its half-year profits hit a seven-year high. EBITDA for the half-year ended 31 December 2020 jumped 21% to $14.7bn with a profit margin of 59%. Shareholders will receive an interim distribution of $1.01 (73p), up from $0.65 last year. This is the main reason why the company features on my list of the best shares to buy now in a UK investing strategy. 

These companies will likely be hoping the good times can continue. Unfortunately, the commodities market is highly unpredictable and volatile. Prices could fall just as fast as they’ve risen over the past 12 months.

That’s something investors need to keep an eye on. These businesses are reporting record profits and record dividends, but it’s unlikely this will continue. Iron ore prices can’t go up forever. A sudden decline in prices may mean BHP and Glencore have to eliminate their dividends once again. 

Still, I like that these groups are committed to rewarding shareholders when times are good. That’s why I’d buy these companies for my portfolio today as part of my UK investing strategy.