I’ve been buying British stocks for my portfolio recently to invest in the UK economic recovery. Here are five companies I’ve also been eyeing up with the intention of buying
British stocks with growth potential
Two companies that appear to have done incredibly well over the past 12 months are Bloomsbury Publishing and Pets at Home. The former has benefited from a reading revival during the coronavirus crisis. The latter has seen sales grow as the number of pets across the UK has jumped to a record level.
Both companies think these trends will continue, and I’m inclined to believe this view. As such, I’d buy both of these British stocks for my portfolio today.
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Of course, if growth doesn’t live up to expectations, these companies may disappoint. That’s the most considerable risk facing the shares right now.
Recovery plays
Bloomsbury and Pets are growth plays. I’d also buy recovery stocks Robert Walters and Workspace for my portfolio of British stocks.
Recruiter Robert Walters saw demand for its services plunge last year. However, over the past six months, demand has steadily recovered as employers have rekindled hiring plans.
Workspace also appears to be benefitting from renewed economic activity. In a market update published at the beginning of May, the flexible office space provider reported that the number of monthly lettings had increased from 71 in January, to 150 by March. However, despite this improvement, the number of customers using its offices was still only 30% by the end of April.
These figures clearly illustrate the challenges Workspace and Robert Walters face. Yes, the economy is reopening, but it could be some time before all sectors reach 2019 levels of activity. In the meantime, these firms will have to deal with lower levels of revenue and profits.
Despite these challenges, I’d buy both British stocks for my portfolio as recovery plays.
Two certainties
When I look at funeral home operator Dignity, I’m reminded of the saying: ‘there are only two certainties in life, death and taxes’.
There’s a particular defensive nature about operating funeral homes, and that’s something Dignity has been able to capitalise on. Over the past decade, the company has gone from strength to strength as it’s built a portfolio of funeral homes across the UK.
However, it’s also recently come under pressure for its aggressive pricing policies. This has hurt the group’s reputation. But its national footprint should provide the foundations to drive a recovery.
In April, the company launched a strategy to develop a better business, building on its lessons over the past few years. If management sticks to the plan, I think the corporation can build back better. That’s why I’d buy the firm for my portfolio of British stocks.
One big red flag for me is the company’s high level of debt. This could become a problem if profit growth doesn’t live up to expectations. Dignity may have to take emergency action to raise capital in this worst-case scenario.
