2 of the best UK stocks to buy

These two top UK stocks have caught my attention in early August trading. Here’s why I’d buy them for my shares portfolio.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Could these be two of the best UK stocks to buy in August? Let me explain why the answer could be yes.

A gaming great

The staggering rate at which the video games market is growing offers plenty of UK shares to get excited about. I myself have invested in development services provider Keywords Studios to ride this theme. And I’d happily buy software developer Frontier Developments (LSE: FDEV) to make money from this phenomenon.

There’s no guarantee that a game title will be a success. Technical problems and a poor critical reception can prove a disaster for games developers like these. But Frontier has a decent track record on this front and Jurassic World Evolution for example — the sequel of which is set for later this year — sold a staggering 2m copies in the seven months following its release a couple of years back.

Analysts at Accenture say that the global video games market is worth a whopping $300bn. This is bigger than the music and movie industries combined. And they think there will be 3.1m gamers by 2023, a 400m rise from today’s levels. Frontier Developments could have a massive role to play in this fast-growing industry. And I think its low forward price-to-earnings growth (PEG) ratio of 0.7 makes it one of the best value stocks for me to buy today.

One of the best UK pharma stocks?

Buying UK pharmaceutical shares could also prove a wise strategy for me as global investment in healthcare grows. There are several British stocks I can buy to ride this strategy, perhaps most notably either AstraZeneca or GlaxoSmithKline. But I think a better way to play this theme could be to invest in Alliance Pharma (LSE: APH).

This is because drugs development is notoriously problematic. And even those two FTSE 100 giants I mentioned above are no strangers to disappointment at the lab bench. Such troubles can result in huge unexpected costs and a great big hole in the revenues column if they fail to launch on time (if at all). This is where Alliance Pharma could prove to be a better buy. The drugs that this pharmaceuticals stock acquires have already gone through the initial testing phase.

That’s not to say that this UK healthcare stock is totally without risk, of course. The products it chooses to snap up could come under scrutiny further down the line. And its acquisition-led model leaves it in danger of overpaying for a drug that may fail to deliver anticipated results.

However, Alliance Pharma has a packed portfolio of labels like revenues drivers Kelo-Cote and Nizoral, products that have underpinned splendid sales growth for years. This UK share doesn’t come cheap — it trades on a forward price-to-earnings (P/E) ratio of 19 times. But I think it could prove worthy of its slightly heavy paper valuation.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild owns shares of Keywords Studios. The Motley Fool UK has recommended Frontier Developments, GlaxoSmithKline, Alliance Pharma and Keywords Studios. 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.

More on Investing Articles

Investing Articles

5 steps to start buying shares with under £500

Learn how this writer would start buying shares with a few hundred pounds in a handful of steps, if he…

Read more »

Young happy white woman loading groceries into the back of her car
Investing Articles

The FTSE 100 offers some great bargains. Is this one?

Our writer digs into one FTSE 100 share that has had a rough 2024 to date, ahead of its interim…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

£9,000 of savings? Here’s my 3-step approach to aim for £1,794 in passive income

Christopher Ruane walks through the practical steps he would take to try and turn £9,000 into a sizeable passive income…

Read more »

Group of young friends toasting each other with beers in a pub
Investing Articles

I’d buy 29,412 shares of this UK dividend stock for £150 a month in passive income

Insiders have been buying this dividend stock, which offers an 8.5% yield. Roland Head explains why he’d choose the shares…

Read more »

Red briefcase with the words Budget HM Treasury embossed in gold
Investing Articles

Could the new UK budget spell growth for these 6 FTSE stocks? I think so!

Mark David Hartley considers six UK stocks that could enjoy growth off the back of new measures announced in the…

Read more »

Investing Articles

With a 6.6% yield, is now the right time to add this income stock to my ISA?

Our writer’s looking to boost his Stocks and Shares ISA. With this in mind, he’s debating whether to buy a…

Read more »

Dividend Shares

This blue-chip FTSE stock just fell 12.5% in a day. Is it time to consider buying?

Smith & Nephew is a well-known, blue-chip FTSE stock with a decent dividend yield. And its share price just dropped…

Read more »

Investing Articles

At 72p, the Vodafone share price looks to be at least 33% undervalued to me

Our writer looks at a number of valuation measures to determine whether the Vodafone share price reflects the fair value…

Read more »