When I’ve been looking for UK shares to buy recently, I’ve been concentrating on companies that may benefit from the economic recovery.
This has thrown up some exciting opportunities, which may not be suitable for all investors. Indeed, the companies I’ve outlined are turnaround opportunities. Unfortunately, more often than not, turnarounds fail to turn around.
Still, despite the risks involved, I’d buy the three UK shares outlined below for my portfolio today as recovery plays.
UK shares to buy now
The first stock is the manufacturer and supplier of plastic and foam packaging products, Essentra (LSE: ESNT). Shares in this company crumbled at the beginning of 2020 after it reported a near-80% decline in earnings for 2019.
It’s now trying to put this lousy performance behind it. For the six months ended 30 June, revenues increased 7.5% on a like-for-like basis. Adjusted profit jumped 34%, and adjusted basic earnings per share rose nearly 40%.
These figures tell me Essentra’s heading in the right direction. Nonetheless, the company has its work cut out to restore investor confidence. It’s also built up a considerable level of debt during the past 24 months, which could hold back recovery.
Despite these headwinds, I’d buy the stock for my portfolio as Essentra moves forward and builds on its recent growth.
Another company I’d buy for my portfolio of UK shares is U and I (LSE: UAI). It’s clear the UK’s facing a structural property shortage, and one way to alleviate this could be to convert old properties. This is U and I’s specialism.
The company partners with local authorities and long-term capital providers to help regenerate city centre locations.
Recently, the company has undertaken a review of its operations. Management has set out goals to reduce costs and increase output as well as reducing debt. I think these changes will put the business on a solid footing to capitalise on the growing demand for real estate development in the UK.
That said, there’s no guarantee U and I’s restructuring will lead to profits for the group. Property development can be time-consuming and costly if the project isn’t managed correctly. If projects overrun significantly, the developer may encounter financial problems.
However, I’d buy this company for my portfolio of UK shares, considering its recovery potential.
The final stock I’d acquire for a recovery portfolio is Metro Bank (LSE: MTRO). This company’s quite risky. In recent years, it’s struggled to earn a profit. And regulators have reprimanded it for failing to account for risk on its balance sheet correctly.
These challenges have really hurt its reputation among investors. However, from a customer point of view, Metro offers something most banks don’t. Its branch network and focus on customers over profit really stand out.
In a world where its competitors are slashing costs and removing branches from town centres, I think Metro has the edge. As such, I think if the business can get past the challenges outlined above, I think it could make a solid recovery play in my portfolio of UK shares.
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Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended Essentra. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.