As the economic recovery begins to accelerate, I’ve been looking for UK stocks to buy now for my portfolio that may be able to capitalise on this growth.
There are two different buckets of equities I want to build exposure to. Hospitality stocks and engineering/construction stocks. I think these sectors should benefit most from the recovery. Hospitality, in particular, may have the most to gain as the industry suffered the most considerable losses in the pandemic.
UK stocks for the recovery
Three of my favourite companies in the construction and engineering sectors are Balfour Beatty, Morgan Sindall and Severfield. The first two are construction specialists, while Severfield is one of the country’s leading steel producers.
Severfield is currently firing on all cylinders. According to a trading update issued ahead of the company’s AGM last week, its UK and European order book now stands at a record level of £376m.
And it’s not just Severfield that’s experiencing rising order levels. Morgan’s order book was £8.3bn at the end of June, up 5% year-on-year. For the half-year ended 2 July, Balfour’s order book stood at £16bn, equivalent to over two years of revenues.
These figures suggest to me that these companies are some of the best UK stocks to buy now for the recovery. That’s why I would buy all three.
However, the construction sector is incredibly cyclical. These companies may be experiencing growth and rising orders today, but that may not last if the economy suddenly takes a turn for the worst. This is something I’ll be keeping an eye on as we advance.
Stocks to buy now
As well as the three construction and engineering businesses outlined above, I’d also buy hospitality groups Wetherspoons and Young’s.
These two businesses sit at opposite ends of the hospitality spectrum. Young’s caters to customers with a higher level of discretionary income. Meanwhile, Wetherspoons aims to keep costs as low as possible for its customers. Both companies have their advantages and disadvantages, which is why I’d acquire both for my portfolio.
As customers return to their watering holes, I think sales at both Young’s and Wetherspoons will rise back to pre-pandemic levels. Spending may even exceed pre-pandemic levels as figures show consumers have put away £150bn in savings during the pandemic. As consumer confidence builds, economists expect a large chunk of this cash to be spent.
These might be some of the best UK stocks to buy now, in my opinion, but they’ll face challenges. The hospitality sector’s struggling with staff shortages, and rising costs are pushing up prices for consumers. These factors may combine to reduce overall sales, despite the tailwinds outlined above.
Even after taking these risks into account, I believe these hospitality businesses are some of the best stocks to buy now.
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Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.