UK stocks appear to be booming in 2021 after a year that saw some of the steepest declines in the history of the index. While the FTSE 100 still trades some way off its pre-pandemic levels of around 7,600p, the UK’s biggest companies have been boosted by the rollout of the vaccine programme in recent months.
I still think there’s plenty of room for growth in FTSE 100 shares as the UK moves tentatively out of lockdown measures this year. Here are two UK firms I would add to my best stocks to buy now list.
GSK
With a market capitalisation of more than £63bn, pharmaceuticals giant GlaxoSmithKline (LSE:GSK) is one of the biggest companies in the FTSE 100.
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GSK’s share price has disappointed investors in recent years though, particularly over the last 12 months as the company’s wider vaccine sales suffered and it seemed to fall behind in developing a Covid vaccine. The shares are down 19% in the last year.
Despite this drop, I see an opportunity to buy GSK shares right now. The company is moving its Covid vaccine through the various trial phases, and demand for this is likely to be strong for years, even after the worst of the pandemic is over.
GSK also has one of the most attractive dividend yields on the index, currently sitting at 6.3%. This would provide me with a decent level of income before factoring in share price fluctuations.
The group has also said it is to separate its biopharma and consumer healthcare businesses this year, which I think will help to streamline operations.
There are still potential downsides for GSK shares right now though. Its joint vaccine venture with Sanofi isn’t expected to be approved until the end of this year, and the company has also announced it will be changing its dividend structure in 2022, with payouts likely to fall. There’s still uncertainty about how the split in its businesses will also affect the share price.
But I see enough upside to buy GSK shares at the moment.
DGE
Times have been tough for Diageo (LSE:DGE) the maker of Guinness and Johnnie Walker. With bars up and down the country (and globally) shut, lockdown restrictions have led to a challenging environment for the hospitality industry.
Despite that, I have been impressed with how the company has been able to cope during the pandemic. The shares have actually grown 12% in the last 12 months, albeit the shares had already been falling by this point last year.
It’s important to note that Diageo is not just a UK-focused company. It operates in more than 180 countries, many of which haven’t been subject to the same strict lockdowns the UK has seen.
While profits were down by 8% compared to the previous year when the company recently reported its half-year results, I don’t think that’s too damaging considering the wholly different environment the company was operating in. While beer sales have been adversely affected, spirits sales have actually increased due to strong off-trade performance.
There are still headwinds for the Diageo share price though. Potential setbacks to vaccine rollouts in key markets such as the US and Europe could dampen the optimism surrounding the reopening of hospitality venues.
Despite the risk, I’d still add Diageo to my best stocks to buy now list.
