The best shares to buy now with £5,000

Private investor buying UK shares at home

If I had a lump sum of £5,000 to invest today, I’d channel this cash in what I believe are the best shares to buy now on the market. 

By the best shares to buy now, I mean companies that have a substantial competitive advantage, strong balance sheet, and room for growth in the years ahead. 

Unfortunately, companies that tick all of these boxes are few and far between. That’s why I’d concentrate my efforts on just a few key equities. To increase diversification, I’d also focus on a couple of different sectors. 

The best shares to buy now

One corporation that’s been on my watchlist is Prudential. After spinning off its UK business, the group has its US and Asian divisions left. It’s working on divesting its US business, which will leave it with just the one division. 

Prudential is a highly recognised brand in Asia. It has a large footprint in Hong Kong and is expanding across the region. Unlike Western life insurance and pension markets, which are relatively developed, the penetration of these products in Asia is still relatively low. So not only does the company’s brand give it an advantage over peers, but it also has growth potential. 

This is why I’d buy the stock for my portfolio today. Some challenges it may face include competition and higher interest rates, which may reduce demand for its life insurance products. 

Another organisation that is on my list of the best shares to buy now is XP Power. This company is one of the world’s leading producers of AC-DC power supplies and DC-DC converters. As electrical grids expand and incorporate more renewable energy production, the demand for these components is expected to grow. That implies XP could be at the beginning of a multi-year growth run as trillions of pounds flow into the renewable energy industry over the next few years.

However, the company will need to keep investing for growth as this is a competitive industry, and these components are easy to replicate. Despite this challenge, I’d buy the stock for my £5k portfolio.

Market leader 

Talking of renewable energy, I think one of the best shares to buy now in the resource sector is BHP. As one of the world’s largest copper producers, this miner should benefit from the same trends as XP. At the same time, the demand for iron ore is expanding as governments worldwide spend heavily on infrastructure projects. BHP also produces iron ore, and has some of the lowest costs in the industry. This only adds to its competitive advantages.

Still, while the group may be benefitting from escalating commodity prices today, prices can rise as well as fall. This is going to be the biggest challenge it faces going forward. 

Finally, in the financial sector, I’d buy IG Group. This financial powerhouse is rapidly becoming one of the UK’s top financial institutions. It’s expanding overseas and should be able to use economies of scale to push its growth plans forward. While additional regulations could hamper growth, this would be another additional to my £5k list of buys today. 

The post The best shares to buy now with £5,000 appeared first on The Motley Fool UK.

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Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended Prudential and XP Power. 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.

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