[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

Prudential

What it does: Prudential is a life insurance and asset management company operating solely in Asia and Africa.

By Andrew Mackie: Following the spin-off of its UK and US businesses, Prudential (LSE: PRU) is now focused entirely on some of the world’s fastest growing markets. This makes complete sense when one considers its growth drivers. Across Asia, for example, despite rising levels of prosperity, insurance penetration is still extremely low. This market is estimated to be worth $1.8trn.

What I particularly like about Prudential is that it is diversified across geography, channel and product. Not only does this provide it with multiple sources of growth but also adds resilience to its business performance. Its distribution network encompasses over 500,000 licensed agents as well as through partnerships with banks (known as bancassurance).

Prudential’s share price has come under severe pressure throughout 2022. It is down 30% year to date. This has been primarily driven by the ongoing closure of the border between Hong Kong and Mainland China. This has hit revenues in its largest market. However, when one considers the explosive growth potential across several of the regions it operates in, today’s depressed share price offers investors an attractive entry point.

Andrew Mackie owns shares in Prudential.

Games Workshop

What it does: Games Workshop designs, manufactures, and sells fantasy miniatures for its Warhammer tabletop gaming experience.

By Zaven Boyrazian. Games Workshop (LSE:GAW) is arguably one of the world’s most recognised tabletop gaming companies. This is the group behind the immensely popular Warhammer franchises, generating the bulk of its revenue through selling miniatures to hobbyists through its global network of retail partners.

Over the last 12 months, the share price hasn’t been the best performer, dropping by over 40%. It seems investors are growing increasingly pessimistic about the short-term performance of this consumer discretionary business. And the latest trading update did show some shrinkage in profits, as consumer spending takes a hit from the cost-of-living crisis.

However, this drag on earnings ultimately stems from a short-term problem. And with the group’s long-term strategy still intact, backed up by an impressive cash war chest of £71m, I can’t help but see the recent share-price drop as a buying opportunity for my portfolio.

Zaven Boyrazian does not own shares in Games Workshop.

Smurfit Kappa Group 

What it does: Smurfit Kappa manufactures packaging products for e-tailers, supermarkets, consumers and industrial customers. 

By Royston Wild. A slew of positive trading updates from the packaging sector would encourage me to buy Smurfit Kappa Group (LSE: SKG) shares for November. 

The FTSE 100 business released financials of its own on Wednesday, 2 November. I think this could help it to record further healthy share-price gains across the month, and beyond. 

Industry rival Mondi reported a 55% rise in underlying EBITDA in the third quarter, it reported in October. It commented that “higher average selling prices and overall volume growth more than offset significant cost pressures.” 

Shortly before this, DS Smith announced that it expected “very strong” revenues growth in the six months to October. Trading was so strong in fact that the firm lifted its half-year profits forecasts. 

Smurfit Kappa’s cheap share price certainly leaves scope for fresh gains if its own financials impress. The packaging powerhouse trades on a forward price-to-earnings (P/E) ratio of just 7 times. 

Royston Wild own shares in DS Smith. 

AstraZeneca

What it does: AstraZeneca is a biopharmaceutical company that develops medicines used by millions of patients worldwide.

By Charlie Carman. AstraZeneca (LSE: AZN) has been a top FTSE 100 performer for a decade. An anticipated return to pre-Covid levels of cancer diagnostics should boost sales for the healthcare heavyweight’s range of oncology products, including Tagrisso, Lynparza, and Imfinzi.

Indeed, AstraZeneca is well positioned for an ongoing transformation in global demographics. Demand for pharmaceuticals to treat chronic diseases continues to rise, and the World Health Organisation predicts one in six people will be aged over 60 by 2030.

Disappointingly, the business suffered a recent setback in a trial for a nasal spray version of its Covid-19 vaccine. Initial testing revealed it didn’t provide adequate protection in humans. However, there’s more to the company’s drugs portfolio than coronavirus treatments, and I think growth prospects look bright elsewhere.

AstraZeneca’s share price has fallen nearly 15% since reaching a 52-week high in August. I believe this presents an attractive buying opportunity to increase the position in my shares.

Charlie Carman owns shares in AstraZeneca. 

Persimmon

What it does: Persimmon builds houses. And when prices are right, it builds up its land bank to build even more houses on.

By Alan Oscroft. The long-term argument for investing in Persimmon (LSE: PSN) is, I think, straightforward. The UK is in the grip of a chronic housing shortage. And our listed housebuilders enjoy strong barriers to entry.

The short-term argument against buying now is the economy, and the growing fears of house price weakness. After all, the Persimmon share price has fallen 50% over the past 12 months, and we don’t want any of that, do we?

Well, actually, I remember the previous housebuilder slump, and I noticed Persimmon was buying up building land when it was cheap. And after that, the shares entered a long and strong bull run. So what’s happening now? Persimmon has been buying up land again.

But the bottom line for me is a P/E ratio of only about five, and a 19% forecast dividend yield. The short-term risks are real, but I think Persimmon is oversold.

Alan Oscroft owns Persimmon shares.

Renishaw

What it does: Renishaw designs and manufactures high-precision measuring equipment and healthcare technology.

By Stephen Wright. I’ve gone for FTSE 250 stock Renishaw (LSE:RSW) as my best British shares to buy in November. This is a business that’s growing, is well protected, and has a strong balance sheet.

Renishaw makes specialist equipment, which it sells to various end markets, including agriculture, healthcare, and power generation. The company has over 1,800 patents protecting its products. 

The company’s balance sheet also looks sound to me. Renishaw has £16.25m in total debt and £141m in cash, which means that I don’t think it’s in much danger with interest rates rising.

Earnings have been growing at an average of 6% annually over the last decade. But the stock has fallen by almost 30% since the start of the year and is now trading at a P/E ratio of 21. 

Stephen Wright does not own shares in Renishaw.

Taylor Wimpey

What it does: Taylor Wimpey is one of the UK’s largest housebuilders, selling homes to private customers and local housing associations

By Paul Summers. The share prices of UK housebuilders have come under serious pressure in 2022 over concerns that rapidly rising interest rates and a protracted recession will dampen demand. Taylor Wimpey (LSE: TW) has been one of the biggest casualties, losing half its value since the beginning of the year.

This may be an opportunity for long-term-focused Fools like me. The FTSE 100 firm is clearly in far better financial health than it was during the Great Financial Crisis. And while dividends can’t be guaranteed, the 10% yield also looks more secure than the payouts on offer from Taylor Wimpey’s rivals. 

CEO Jennie Daly’s comments on the company’s outlook will be closely scrutinised when it releases a trading update early in November. With a P/E of just five, however, I suspect a lot of fear is already priced in. 

Paul Summers has no position in Taylor Wimpey.

Legal & General

What it does: Legal & General is a British multinational company that provides insurance, savings and investment products.

By Nathan Marks. I’m looking to Legal & General (LSE:LGEN) for my top British shares to buy for November. As one of the UK’s largest pension funds, it’s been grappling with the recent chaos in the bond market.

The Bank of England took emergency intervention in early October. That was to mitigate a material risk to the financial stability of the types of services that Legal & General provides. However, the company said that this episode had a “limited economic impact” on its businesses and still expected a full-year operating profit of 8%.

Market volatility could still worsen, causing further uncertainty in the company’s balance sheet and liquidity. However, the stock looks great all-round value and I think it’s been oversold. Today it trades at a P/E ratio of 6.8 and yields a very attractive 8.2% dividend.

It’s hard for me to ignore this strong business with historically robust demand for its products and services.

Nathan Marks has no position in Legal & General.

International Airlines Group

What it does: International Airlines Group is an Anglo-Spanish multinational group that is host to renowned airlines such as British Airways, Iberia, Aer Lingus, Level, and Vueling.

By John Choong. Despite a potential recession on the cards, travel demand still remains robust. As such, I think International Airlines Group (LSE:IAG) shares look lucrative at their current price.

In its most recent trading update, the firm disclosed that demand for travel remains strong and is still recovering to 2019 levels. There also seems to be an uptick in business and upper-class travel, which was echoed by its American competitors. CEOs are of the opinion that consumers are still spending despite inflationary pressures, just less on goods but more on services. Therefore, IAG is expected to benefit as the holiday season approaches.

Nonetheless, it’s worth noting that IAG’s high debt-to-equity ratio (107%) isn’t ideal in a high interest rate environment, and is something investors should definitely take note of. The group will have to hope that its free cash flow continues to remain robust through an economic slowdown in the medium term, or risks damaging its bottom line and sending its share price back down.

John Choong has no position in IAG.

The AstraZeneca (LSE: AZN) share price has been behaving like a dream over the past 10 years or so. There aren’t that many FTSE 100 companies with stocks that have risen so steadily for so long. But the pharmaceutical company has delivered the goods. And it’s share price has been travelling broadly north-east on the chart for years now.

However, just lately something’s up. Since August, the share has declined by just over 12%. Is there a problem with the business? I don’t think so. Set against the wider bear market we’ve seen for stocks, AstraZeneca has actually held up quite well. Indeed, the recent weakness looks like a buying opportunity for me. But sadly, I have no spare cash to take advantage of it!

Robust operational performance

Scoping back, the one-year performance of the stock remains encouraging. With the share price near 9,952p, it’s just over 14% higher than it was a year ago. And I reckon the progress has been driven by a robust operational performance in the underlying business. 

AstraZeneca is a remarkable business considering its size. And in recent years it’s been pumping out impressive growth numbers for earnings. Indeed, the £152bn market-cap company can put many smaller growth outfits to shame.

Right now, City analysts following the behemoth expect earnings this year to knock the ball out of the park with an almost 200% increase. And they’ve pencilled in a further uplift of just over 14% for 2023.

It’s all being driven by a resurgent new products pipeline propelled by a huge research and development (R&D) effort over many years. The days of so-called patent cliffs and falling sales are now firmly behind the company. And that’s all worked out exactly as prescient investors were predicting when they loaded up with the stock in the doldrums a decade ago. Sadly, not buying the stock then was another investing misstep I made. I was aware of the company’s potential, but failed to act on that knowledge at the time.

A virtuous circle

AstraZeneca delivered its half-year report at the end of July. The company said: “Strong revenue performance and R&D success enables further investment in the pipeline and new launches.” And that neatly sums up the case for me investing in the business now. Success can lead to enhanced potential for more success in a kind of virtuous circle.

I think it’s wise for me to examine the way companies invest in R&D for my future growth investments. Studying AstraZeneca’s record of investing in R&D could have given me the conviction to buy some of its shares a decade ago. It’s not a guarantee of making a successful investment in shares. But it is another factor to add to the overall research picture.

Meanwhile, today’s share price level throws up a forward-looking earnings multiple of about 15 for 2023. I’d describe that valuation as up with events and fair. However, I reckon the long-term potential for the business to grow remains intact.

There can be no certainty the R&D pipeline will keep on delivering big-selling medicines in the years ahead. And I could lose money on the shares if progress declines. But, right now, the business is performing well. And I see the stock as attractive.

AstraZeneca (LSE:AZN), a pharma and biotech company, is one of the most popular UK shares for stock market gurus from across the pond.

It’s no surprise considering the stock is second only to Shell in the FTSE 100 index by market cap.

And US investors in charge of multi-billion dollar funds are taking notice of the Anglo-Swedish pharma king.

Who are these super investors? And how have their investments been faring so far?

A hard pill to swallow

Ken Fisher, founder of Fisher Investments, has beaten the return of the S&P 500 index by an average of 4.2% per year over the last two decades.

The skilled stock picker held $1.18bn worth of AstraZeneca shares at the date of his most recent filing. Since his first purchase in 2015, he’s made a net return of 40%.

However, this isn’t actually that impressive given the S&P 500 returned 44% over the last five years.

Many of the super investors on the list have even made a loss through holding AstraZeneca stock.

Steven Cohen – who founded the hedge fund Point72 Asset Management – has suffered a 16% loss on his AstraZeneca shares. The investor, who’s also the owner of the New York Mets baseball team, started dealing in AstraZeneca shares in 2014 and currently holds $109m worth.

So should I add AstraZeneca to my portfolio despite these disappointing results?

Pipeline’s looking fine

A major risk for AstraZeneca investors comes in the potential for drug development projects being frustrated by unforeseen obstacles. At the same time, existing products are only protected by patents for a set period. Pharma companies are constantly in a race to get patented products approved to replace those that are expiring.

But given AstraZeneca has a pipeline of 184 projects in development, I believe it could be less exposed to this risk than comparable companies. Pfizer’s pipeline, for example, comprises only 104 projects in development.

The company is also globally diversified. Its Q2 report, for example, shows 36% of revenue came from the US, 30% from emerging markets and 20% from Europe.

Healthcare also tends to stand up well to inflation and recession, the two spectres hanging over investors in 2022. In the words of Confucius: “A healthy man wants a thousand things; a sick man wants one”. That one thing could be an AstraZeneca drug.

However, at a forward price-to-earnings (P/E) ratio of 14, the stock looks expensive compared to peers Merck (with a P/E of 12) and Pfizer (with a P/E of 8). On the other hand, Moderna’s P/E ratio is higher at 21.

I can’t see compelling investment case for my portfolio today. I do want to invest in healthcare, but lack any special insights into pharma technology, so I’d prefer to insulate myself from individual company risks by buying a healthcare ETF.

AstraZeneca shares were rising, reaching a 52-week high of 11,540p on August 25, but have slipped 13% since. Despite falling in recent months, the stock is still up 12% over the year.

Looking cheap?

It’s currently trading with a price-to-earnings (P/E) ratio of around 17. That’s more than the FTSE 100 average, but isn’t expensive for the sector. The average P/E ratio for the trailing 12 months (TTM) is 25. In that respect, AstraZeneca looks inexpensive.

The current discount versus the summer also suggests there might be some headroom for share price growth as conditions in the market have not deteriorated. The stock crossed 10,000p in March and, with one exception, this is the first time the share price has fallen below that benchmark in the last six months.

A positive outlook

AstraZeneca has one of the best pipelines in the industry, with 184 projects in development right now. By comparison, Pfizer only has 104.

However, it’s worth noting that its pipeline is dominated by label expansion developments for already approved drugs, as opposed to entirely new opportunities. Despite this, it is still a very impressive pipeline and it’s good to see the company so actively exploring growth opportunities.

AstraZeneca, arguably the crown jewel of the index, has also been active in acquisitions. The purchase of Alexion for $39bn also adds to the company’s growth potential, opening up new opportunities in medicines for rare diseases.

The Anglo-Swedish group also recently acquired US-based LogicBio Therapeutics, paying a sizeable 660% premium for the genome editing company. While expensive, it’s good to see the firm moving into new areas — and gene editing is among the most promising.

Benefitting from a weak pound

Revenue in H1 was geographically varied. Some 38% came from the US, 28% from emerging markets, 20% from Europe, and 14% from the rest of the world. And with the pound down considerably against the dollar this year, this is an area in which the pharma and biotech giant could really benefit as USD earnings will be inflated when converted back into GBP.

In fact, the pound is the worst performing currency in the G7 this year. So earnings in an array of international currencies will be inflated when converted back into pounds. Naturally, this could also mean paying more for foreign-derived inputs.

However, on the whole, I’m pretty bullish on AstraZeneca and see the current dip as a good buying opportunity. As a result, I’m looking to add this stock to my portfolio.

The near future could be turbulent for investors like me. Nonetheless, some Footsie stocks look more resilient than others to weather storms ahead. Here are two I’d buy today.

London Stock Exchange Group

London Stock Exchange Group (LSE:LSEG) was one FTSE 100 share to tick higher in the wake of Chancellor Kwasi Kwarteng’s statement. The company’s been a top performer this year — its share price has risen nearly 8%.

So, why did London Stock Exchange (LSE) shares react positively to the government’s measures? First, let’s examine interest rates.

In light of inflationary pressures, the Bank of England’s chief economist Huw Pill warned that fiscal stimulus injected into the economy “will require a significant monetary policy response“. Some experts forecast the base rate could exceed 5.5% by next spring.

The LSE owns majority stakes in transactional interest rate swap businesses, such as TradeWeb and SwapClear. Rising interest rates are likely to boost growth for these companies. In turn, this should contribute to the exchange’s bottom line.

A second key factor behind the LSE’s positive momentum is market volatility. Elevated trading volumes contribute to the exchange’s income. With further fiscal statements due in the months ahead, the LSE should benefit as traders continue to focus on British shares.

The stock isn’t without risks. A weak pound, Brexit, and a dwindling IPO pipeline are threats to London’s position as a leading equity market. If fewer firms choose to list on the London Stock Exchange, this could limit future growth prospects for the company.

However, London’s been a global financial centre for centuries. I’m not convinced this status will be displaced overnight. Everything considered, I’m bullish on LSE shares — I’d buy.

AstraZeneca

Healthcare is traditionally viewed as a defensive sector and AstraZeneca (LSE:AZN) is perhaps the jewel in the FTSE 100’s pharmaceutical crown. The stock’s outpaced the index, climbing over 15% this year.

AstraZeneca’s diversification allows it to deal with currency risks as sterling yo-yos. The business generates greater total revenue in both emerging markets and the US than in Europe.

The business also stands to benefit from recent approvals for cancer drugs and Covid-19 treatments. I view this as the reward for a decade of increased R&D investment under CEO Pascal Soriot’s leadership.

In further developments, the Anglo-Swedish outfit recently acquired US-based LogicBio Therapeutics, a genome editing company, paying a handsome 660% premium on its share price.

The deal may look expensive. However, I’m encouraged to see the firm executing ambitious expansion plans while many other businesses are simply treading water.

Admittedly, AstraZeneca has a stubbornly high valuation. This does concern me — that the firm’s strong growth potential in oncology has already been priced in. A 2.2% dividend yield isn’t too exciting either.

Nonetheless, the AstraZeneca share price has nearly doubled over five years. I believe there’s every chance it can continue to perform well over the next five. I’d add to my position today.

Keeping me healthy

The first company on my radar is AstraZeneca (LSE:AZN). I’ve never owned the stock, but several of my friends do. With the share price rallying 24% over the past year, it’s easy to see why.

The business has a strong track record of performance, with H1 2022 results being another good period for the business. I like the fact that the pharma giant isn’t overly reliant on one area for revenue. The largest division (oncology) generated 35.5% of total revenue during H1. The other divisions also made a meaningful contribution towards the group level figure. This means it’s less sensitive to a sudden change in the pharma landscape.

Going forward, I think the way it forecasts Covid-19 medicine revenue could be a risk. For the full year, the guidance is that total revenue from Covid-19 medicines is anticipated to be broadly flat versus the previous year. I think this is optimistic. It’s true that we don’t know what the future will bring for the virus, but I’d rather the business err on the conservative side to avoid over-promising and under-delivering.

So why do I think it’s a no-brainer stock to buy now? Healthcare is a sector that shouldn’t be really hampered if the UK economy struggles this winter. It has shown over time that it can generate sticky revenue thanks to the broad client base and necessity of products sold.

A value stock still down from the pandemic

Another good stock that I think is appealing is Informa (LSE:INF). The FTSE 100 company has a range of operations, including running events and providing content and research.

One of the reasons why I think the stock is a good buy for me now is due to the fact that we’re over the pandemic slump. This means that people are more comfortable going to in-person events and businesses are happier to spend on marketing and attending such exhibitions. I expect this trend to continue into 2023, so I think now is a good time to jump on the bandwagon.

With the share price up 4.6% in the past year and a price-to-earnings ratio of 32, some might say this isn’t a great value stock pick. However, I’m looking at the longer-term view. The business is still recovering from the financial hit of Covid-19. The share price could rally 50% from current levels and still not be at the levels seen before the March 2020 crash. With interim H1 revenues up 59.1% year on year, there’s clear value (in my opinion) in me buying now if this momentum can carry on.

I do think that the business could specialise in one area, as some of the divisions aren’t that linked together, providing some potential inefficiencies. But as a whole, it’s a stock (along with AstraZeneca) I’m likely to buy for Q4.

Investors who have taken a Foolish long-term approach have done even better. A £1,000 investment five years ago would be worth a healthy £2,110 today, plus dividends.

I’d like to add some more healthcare exposure to my portfolio. Can AstraZeneca keep climbing, or is this high-flyer at risk of a sharp correction?

Good progress

AstraZeneca’s sales growth has picked up pace over the last couple of years. Annual revenue has risen from $24bn in 2019, to $44bn over the 12 months to 30 June.

Admittedly, this growth has been helped by some one-off changes. The $39bn takeover of US firm Alexion added $3bn to revenue during the second half of 2021. Sales of the Covid-19 vaccine contributed almost $4bn last year.

However, one of the main attractions for me is that it isn’t reliant on just a handful of core products. In 2021, the company had 13 blockbuster medicines — those with sales of more than $1bn.

This diversity is a key attraction, in my view. It should mean that even if AstraZeneca suffers disappointing results from individual medicines, the company as a whole can still deliver reliable profits.

More growth ahead?

The acquisition of Alexion was a big deal, even for a £150bn company like AstraZeneca. Alexion isn’t the only acquisition this business has made in recent years, either.

CEO Pascal Soriot has now launched a $2bn restructuring programme to streamline and integrate the expanded business. He expects to achieve cost savings that will add $1.2bn to pre-tax profits each year by 2025.

Broker forecasts suggest that the group’s sales growth will slow during this period. However, City analysts expect that AstraZeneca’s profits will surge as costs fall and sales of key blockbuster drugs continue to grow.

The latest estimates I can see suggest that the shares could be trading on just 13 times 2024 forecast earnings.

Are the shares good value?

I’m pretty sure that this business can continue to develop successful new medicines and generate returns for its shareholders.

Based on current forecasts, I think that AstraZeneca shares could still offer good value on a long-term view.

Despite this, I’m probably not going to buy at the current £100 share price. The reason for this is that I don’t think the current valuation offers enough of a margin of safety.

As things stand today, AstraZeneca shares trade on nearly 18 times 2022 forecast earnings and offer a dividend yield of just 2.5%.

If earnings continue to rise in line with forecasts, I think this could be a fair price. But if it disappoints the market in any way, I think the shares could fall sharply.

I’d prefer to invest when the market is already feeling cautious. To buy AstraZeneca, I’d be looking for a share price under £85. That would lift the dividend yield above 3% and provide a more attractive margin of safety, in my view.

AstraZeneca was founded in 1999 through the merger of the Swedish company Astra AG and Britain’s Zeneca Group. Zeneca itself was formed in 1993 by the spinning off by ICI of its pharmaceutical operations.

For the 29 years since 1993, the company has been growing consistently. It has far outperformed the FTSE 100 index. Its share price has increased by an annual average of 13.88%, against an annual average increase for the Footsie of 4.74%.

The UK inflation rate for this period was 2.05% per annum. Excluding dividends, £1,000 invested in Zeneca in 1993 would have grown to £26,840 today while £1,000 invested in a FTSE 100 tracker fund would have only grown to about 9% of this, to £2,375.

AstraZeneca is currently paying an annual dividend of 2.0%. It is the only a ‘buy and hold forever’ stock in my portfolio. For me, it is in a class of its own as a large-cap FTSE 100 stock, many of which tend to be sluggish performers.

My decision to buy the stock was influenced by the fact that in the last 15 years, 2016 was its only down year.

AstraZeneca is a developer, manufacturer and marketer of a wide range of drugs and pharmaceutical products for oncology, cardiovascular, gastrointestinal, infection, neuroscience, respiratory and inflammatory health problems. It was one of the leaders in the race to develop a vaccine for the Covid-19 pandemic.

The world’s major pharmaceutical companies spend many years and vast sums of money in the search for new ‘breakthrough’ drugs — those that can generate £1bn or more in annual sales.

From the time a new drug receives regulatory approval, the clock is ticking on its patent exclusivity. Once this expires, typically in a decade or two, revenues for the original drug fall.  For the last 10 years the leading companies have been spending about a quarter of their revenues on new drug development.

For investors like me, it is important that pharmaceutical companies have drugs in their pipelines with breakthrough potential, together with adequate funds to finance their development and trials. It is a highly competitive and inherently risky business.  

The future

Before the Covid-19 pandemic put the global pharmaceutical industry in the spotlight, there were already major challenges facing it. Worldwide, the number of people aged 65 or more is projected to double — to over 1.5 billion — by 2050.

In addition, the growing middle class with increasingly sedentary lifestyles is leading to greater demands on health services. Chronic non-contagious diseases, such as cardiovascular disease and cancer, are expected to become increasingly prevalent and will demand innovative pharmaceutical solutions.

I believe AstraZeneca is well placed to thrive under this scenario and sustain its outstanding historical growth for many years to come. It has several new breakthrough drugs in its pipeline. For oncology, its drug Enhertu has been granted five separate breakthrough therapy designations by US regulators.

And the London Stock Exchange (LSE), being one of the oldest and most mature stock markets in the world, has a host of blue-chip shares to choose from. 

In this article, we will look at the largest companies in the UK in terms of market size and go over the fundamentals of investing in blue-chip companies in the country.

What are blue-chip stocks?

Blue-chip stocks are companies with a history of positive performance, investor returns, and a stellar reputation. They usually generate billions in revenue every year and have secure finances dating back decades.

A blue-chip company is typically a market leader in its sector, which gives it pricing power to keep ahead of the competition. Its products are usually well-known and have a loyal consumer base. 

Even better, companies with a long history of growth generally pay an above-average dividend to investors, backed by robust cash reserves. Investor interest is often high in blue-chip shares because they can ride volatile markets and usually rebound fast in the event of a market crash.

To understand how blue-chip stocks are categorised, we need to understand market capitalisation (market cap). Market capitalisation is the total monetary value of all a company’s outstanding shares. It is a commonly used metric that helps investors judge the size, true value, and investor interest of a company. It helps group companies into large-cap, mid-cap, and small-cap categories on trading platforms. 

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Top blue-chip stocks in the UK

Now that we’ve defined what blue-chips shares are, here are some of the best blue-chip stocks listed on the UK stock market by largest market capitalisation.

1.   Shell

After switching its headquarters to the UK in 2022 and simplifying its share structure, Shell (LSE:SHEL) has become the largest listed company in the country. The oil and gas giant has a global presence and operates in most segments within the crude oil industry. 

After incurring a loss of £21.6bn in 2020, this blue-chip stock bounced back strongly in 2021, recording an income of £20.1bn. While this was largely due to the big jump in oil prices in 2021, it also serves as a good indicator of future performance. Shell’s ability to rebound thanks to the demand for oil and robust revenue streams is a big positive for any investment portfolio.

And while the renewable energy lobby is growing stronger, crude oil demand is expected to remain high over the next few decades. Based on current trends, the U.S. Energy Information Administration expects a per barrel price of $178 by 2050. And rising oil prices will increase revenue while improving margins, which is a good indicator of future profits.

Key metrics:

• Market cap: £174.3bn (as of 23 May 2022)
• Average daily volume: 30.7m
• Headquarters (HQ): London, UK

2.   AstraZeneca

This British-Swedish pharma giant, established in 1999, is a leader in oncology, biopharma, and rare disease treatment. The company has a thriving R&D department working on crucial treatment areas for chronic respiratory and gastrointestinal diseases as well. 

AstraZeneca (LSE:AZN) has a global presence, which accelerated as a result of its Covid-19 vaccine, developed alongside Oxford University. The company has recently improved its new drug pipeline, and has some promising treatments in the final stages of development. These should be launched over the next five years.

Its R&D ventures are backed by a healthy cash flow, which has grown significantly over the last decade. And this blue-chip stock operates in an industry that’s in the midst of a huge boom.

In fact, the pharma industry is expected to grow at a compounded annual growth rate (CAGR) of 11% and is projected to exceed $1,500bn by 2028. Oncology care and treatment is one of the fastest-growing areas within the industry and is also one of AstraZeneca’s highest earning segments. This adds to the large-cap stock’s growth potential over the next decade.

Key metrics:

• Market cap: £162.6bn (as of 23 May 2022)
• Average daily volume: 7.37m
• HQ: Cambridge, UK

3.   HSBC Holdings

UK-based finance giant HSBC Holdings (LSE:HSBA) operates in over 60 countries and is the world’s sixth-largest bank in terms of total assets and market capitalisation. After the turbulent economic climate in 2020, HSBC recovered well and saw operations across all regions turn a profit.

The group has steadily improved its presence in Asia and is now a top financial services provider in the region. Asia is witnessing a huge surge in business start-ups that will require funds over the next decade. In fact, HSBC’s board is confident that its Asia-first strategy will be an effective long-term revenue generator given the projected economic growth of the region.

But it also means that this UK blue-chip stock is heavily impacted by the economic conditions in Asia. Although the situation in 2021 was unfavourable, analysts expect this growth stock to benefit from its renewed focus. Multi-billion-dollar development projects and increasing foreign investment in the region are good earning prospects for financial institutions.

Key metrics:

• Market cap: £98.6bn (as of 23 May 2022)
• Average daily volume: 3.72m
• HQ: London, UK

4.   Unilever

With a customer base of over 3.5bn people, spread across 100 countries, Unilever (LSE:ULVR) is undoubtedly a fast-moving consumer goods (FMCG) giant. It has a portfolio of over 400 brands and is the fourth-largest FMCG company in the world in terms of sales.

Its three largest divisions are beauty and personal care, food, and home care products. Thirteen of Unilever’s brands recorded a turnover of over €1bn in 2021. During the same period, the company also recorded an underlying sales growth of 4.5%, which was its fastest year-over-year growth in nine years until that point.

Environmental, social, and governance (ESG) goals are already huge markers of success for a business and are only expected to grow in importance over the long term. Unilever recognises this and has reduced its greenhouse emissions by 64% since 2015 and switched to recyclable or compostable plastic packaging in 53% of its products. 

In addition, 52% of the company’s management roles are held by female employees and it has invested €445m on empowering businesses owned by under-represented groups. Sustained efforts in this area could add a lot of positive momentum to Unilever’s brand image and its performance in the stock market as well.

Key metrics:

• Market cap: £89.86bn (as of 23 May 2022)
• Average daily volume: 7.32m
• Headquarters (HQ): London, UK

5.   Diageo

A major player in the global alcohol beverage space, Diageo (LSE:DGE) owns and operates brands like Johnnie Walker and Guinness. As of 2020, the company’s share of the global alcohol market was 4%. And Diageo’s board expects this to increase to 6% by 2030. 

Analysts estimate the alcohol market to grow at a CAGR of nearly 3% and this would bring its valuation to nearly $2,000bn by 2030. Emerging markets like Asia and Africa are expected to grow much faster over the next decade. And Diageo is already expanding fast in these areas.

This blue-chip company already holds over 20% of the growing Indian malt beverage segment and is growing fast in mainland China thanks to its broad range of premium offerings and regional brands. The company has also been on an acquisition spree in the last half-decade, identifying growth areas and acting fast.

Key metrics:

• Market cap: £82.4bn (as of 23 May 2022)
• Average daily volume: 4.38m
• Headquarters (HQ): London, UK

Are blue-chip stocks right for you? 

It is important to note that high valuations and a history of financial growth do not guarantee future returns. Investing in the best blue-chip companies is usually a good starting point to a strong long-term portfolio but investors should identify market trends and also pick strong growth stocks operating in exciting new areas too.

And it is important to recognise when a blue-chip company is forced to transition to meet market demands. Shell is a good example of this. The hydrocarbon energy market is expected to shrink as renewable energy grows. If Shell does not transition effectively, it could slowly lose its existing revenue streams.

Also, the pharma and FMCG companies on this list are susceptible to competition from discount options. Especially in an environment where inflation is rampant, the company offering the lowest price usually sees a jump in market share. If the value of branded products decreases, generic products and discount retailers could become attractive to the average consumer.

But UK blue-chip stocks are an excellent reference for the economic strength of a country. They help beginner investors understand how the stock market works and help seasoned investors understand the market mood and new areas of interest. 

Even outside of the stocks discussed in this article, there are several excellent FTSE 100 blue-chip shares that are worth exploring.

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But today, I’m looking at AstraZeneca (LSE:AZN). It’s not what people would conventionally refer to as a growth stock. After all, it’s been around for decades, it’s the biggest company on the FTSE 100 and it offers a dividend, albeit a small one. In fact, its dividend yield is lower than all but one of the biggest US pharma/biotech firms.

However, I contend that AstraZeneca is among the best stocks poised for growth. And that’s why I’m looking to buy this stock for my portfolio.

Recent performance

AstraZeneca’s breast cancer treatment candidate Enhertu, or trastuzumab deruxtecan, was approved for use in the US last week, and that piece of good news came on the back of a positive earnings update a few days before.

The Anglo-Swedish biotech had boosted its earnings projections for the year on an increase in prescriptions of its Evusheld injection that protects against Covid-19. AstraZeneca said that total revenues were now expected to increase by “a low twenties percentage“. That’s up from previous estimates in the “high teens“.

Earnings also beat analysts expectations. Core earnings came in at $1.72 per share for the three months to 30 June, versus an expected profit of $1.56 per share. Revenue hit $10.8bn during the period.

Product sales were up 41% at $21.6bn for the six months to 30 June with oncology coming in as a big growth area, up 22%.

The growth picture

AstraZeneca has one of the best pipelines in the industry, with 184 projects in development right now. However, it is worth noting that the pipeline is dominated by label expansion developments for already approved drugs, as opposed to entirely new opportunities. But by comparison, Pfizer only has 104. It’s still a very impressive pipeline.

The purchase of Alexion for $39bn also add to the company’s growth potential. The acquisition marks AstraZeneca’s entry into medicines for rare diseases and opens up a new revenue stream for the pharma giant.

I also like the geographical diversification of AstraZeneca’s earnings. Total revenue in H1 was split nicely across continents with 38% coming from the US, 28% from emerging markets, 20% from Europe, and 14% from the rest of the world. 

I’m buying

AstraZeneca stock is up a whopping 30% over the past 12 months and 136% over the past five years. It’s a big winner in the industry and I’m backing it to continue growing in the coming years. That’s why I’d add this stock to my portfolio today.