3 no-brainer UK shares to consider buying with just £100?

Finding the best UK shares to buy can be a bit of a challenge. Yet, thanks to platforms like Hargreaves Lansdown, it’s easy to discover which companies other investors are snapping up. And last week, the three most popular British investments were City of London Investment Trust, Scottish Mortgage Investment Trust, and Greencoat UK Wind (LSE:UKW).

So if everyone else is buying these shares, are they simply no-brainer additions to a portfolio today?

Exploring opportunities

Investing blindly and following what other investors are doing has historically been a pretty poor strategy for building wealth. Even when the underlying business is top-notch, there’s a good chance the investment objectives and risk tolerance between different investors are wildly different.

With that in mind, let’s take a closer look at Greencoat to understand both the appeal and what could go wrong.

The business is fairly straightforward. It owns a portfolio of on- and off-shore wind farms scattered across the UK, generating clean electricity that’s sold to energy suppliers. Britain, being a windy place, has enabled the company to be highly cash-generative with a rewarding track record of dividends and share buybacks. And right now, the stock’s offering an enormous 8.9% yield.

Needless to say, from an income investor perspective, this sort of dividend return is impressive… perhaps too impressive.

Digging deeper

A big reason why Greencoat’s yield is so high right now is thanks to the share price falling by almost 25% since the start of 2024. Falling energy prices have taken a 30% blow to the group’s net cash generation, while higher interest rates have ramped up the pressure of its large debt burden.

Consequently, Greencoat’s future success is dependent on several factors beyond management’s control, ie interest rates, energy prices and wind speed. And this uncertainty seems to be dragging the stock in the wrong direction. But has this created a buying opportunity?

Looking at the activity on Hargreaves Lansdown’s platform, the answer appears to be ‘yes’ in the minds of many investors. After all, once interest rates are alleviated, the pressure on Greencoat’s margins will ease and provide more flexibility. And to be fair, this thesis sounds quite reasonable.

Providing that Greencoat can continue to navigate through these adverse macroeconomic conditions to the other side, buying today could lock in an impressive yield while also eventually benefitting from a share price recovery.

The bottom line

As an existing shareholder of Greencoat UK Wind, I remain bullish on the long-term potential of this enterprise. Even more so, now that the UK government’s pushing for the rapid construction of more wind farms, providing a welcome catalyst for these shares.

However, with inflation actually back on the rise since September, interest rate cuts may take longer than expected to materialise. And if prices start rising even faster, interest rate hikes may return, creating even more unwanted pressure on Greencoat in the process.

With this risk in mind, taking a cautious approach with pound/cost averaging seems like a prudent idea for investors considering adding this business to their portfolios.

As for the other popular UK shares being bought right now, investors will also need to dig deeper to discover both the risk and potential reward before committing any capital.

The post 3 no-brainer UK shares to consider buying with just £100? appeared first on The Motley Fool UK.

Pound coins for sale — 31 pence?

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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Zaven Boyrazian owns shares in Greencoat UK Wind. The Motley Fool UK has recommended Greencoat Uk Wind Plc and Hargreaves Lansdown Plc. 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.