Both the FTSE 100 and FTSE 250 are on the front foot today as hopes over the economic recovery improve. But I for one am not getting too excited. There’s a long way to go in the fight against Covid-19 before I’d be happy to claim that UK share prices could be about to rocket.
Having said that, I’ve built a watchlist of top British stocks I might buy when the new bull market does clearly and finally arrive. Here are a couple on my ISA radar today.
#1: Fasten your seatbelts
I believe that Trifast (LSE: TRI) is an excellent stock to buy for the new bull market. This is because the automotive and electrical goods sectors always bounce back strongly during the early stages of an economic recovery. And this UK share supplies a wide range of bolts, screws and other fastenings that keep our fridges, our cars and our laptop computers together.
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Trifast isn’t without risk during the early stages of the recovery, though. It faces significant currency-related headwinds if the pound, which just hit its highest for almost three years, continues to rise. This is because the company generates the lion’s share of its revenues and profits from foreign markets.
I still think Trifast is an attractive UK share to buy today. City analysts reckon the manufacturer will bounce back into the black this fiscal year (to March 2021). They predict that annual earnings will soar 32% in financial 2022 too. Such projections leave the company trading on a forward price-to-earnings (P/E) ratio of 27 times.
#2: Another UK share on my ISA radar
I also believe that WPP’s (LSE: WPP) profits could soar during the early stages of an economic recovery. This is because advertising spending is one of the fastest things to bounce back when economic conditions pick up.
Things could be particularly lucrative for agencies like WPP following this particular downturn too. Citizens all over the globe have built up huge cash reserves as a result of being locked down for the best part of a year. Bank of England chief economist Andy Haldane recently estimated that household savings in the UK alone might hit an eye-popping £250bn by June.
It’s a cake that companies all over the globe will be wanting to get a slice of. And I think FTSE 100-quoted WPP has the expertise, the scale, and importantly an increasing focus on the fast-growing digital arena, to make the most of this opportunity.
There is a possible fly in the ointment though. Companies are also increasingly pulling their media operations in-house instead of using UK media shares like WPP to big up their products and services. Consultancies are also vying for business against the traditional agencies.
City forecasters reckon WPP’s earnings will increase 28% and 15% in 2021 and 2022 respectively. Consequently the company trades on a low forward price-to-earnings growth (PEG) multiple of 0.5 times. Be warned, though: a bumpy economic recovery could cause these profits forecasts, like those of other UK shares like Trifast, to be blown wildly off course.
