Shares offer me a way to participate in the success of leading British companies as they navigate the economic recovery. If I had £5,000 I’d think of putting it into top UK stocks. Here are three I would consider picking for my portfolio.
Medical device multinational
Medical devices manufacturer Smith & Nephew (LSE: SN) benefits from its broad geographic reach. Its products have a strong reputation and the company’s medical customer base helps support premium pricing. But the pandemic knocked the company’s performance. As hospitals cancelled or postponed elective surgeries, Smith & Nephew saw sales fall badly.
I see that as a temporary aberration. There is always a risk that any further lockdowns could again hurt sales. But in its recent quarterly results, the company revealed a significant jump in sales. Despite that, the Smith & Nephew share price has fallen 10% in the past month. It is down 10% over the past year too. To me, that looks like an overreaction. I expect medical procedures to return to normal levels at some point and Smith & Nephew should be a beneficiary, as the results suggest. I would consider putting a third of my £5,000 into the company now.
Top retail stock: JD Sports
As the Olympic Games fade into memory, hopefully there will still be an ongoing sales boost for JD Sports (LSE: JD). But the company has proven it is able to grow revenues and profits even without the extra interest in sports generated by a high-profile event.
Retail can be a very challenging business, which is why I’m impressed by JD’s proven ability to grow revenues and profits. Further geographic expansion will hopefully help that continue, although one risk is that it comes at lower profit margins. Operating across diverse markets can add costs.
But as the world moves further towards the casualisation of office and leisure clothing, I think JD’s star could continue to shine brightly. It has proven expertise in the mechanics of successful retail, including in its growing online operation.
High street bank
The third of the top UK stocks across which I would consider spreading my £5,000 is Natwest.
The bank is a household name, which is one of the reasons I like it. Its brand recognition and wide customer base should help to support revenues for years to come. Meanwhile, as the company buys back shares from the government, it can cancel some and boost earnings per share.
One risk here is similar to the risk I see at competitor banks such as Lloyds. With heavy exposure to the UK banking market, Natwest is sensitive to changes in the UK economy. If the economy weakens, that could hurt both revenues and profits.
Top UK stocks: my move
If I had £5,000, I would consider buying these three top UK stocks for my portfolio now. But even without that amount to invest, I am attracted to the companies and would still consider buying these shares. I would buy all three, so I could get some risk reduction from diversification.
