In the past few years, British shares have often been neglected by investors more attracted to US growth stocks. I think that has created some attractive buying opportunities in the wider UK stock market. While some US shares like Google parent Alphabet trade for thousands of dollars, the good news is that I can invest in many UK shares with a much smaller amount. If I had a spare £700 right now, I would consider splitting it across shares of three companies in the FTSE All Share index to hold in my portfolio.
Rolls-Royce
Aircraft engine maker Rolls-Royce (LSE: RR) is no stranger to turbulence – and neither are its shareholders. The Rolls-Royce share price has been hovering around penny stock territory since it announced yesterday that its chief executive is leaving. Over the past year, this FTSE All Share company has fallen 8%.
But despite the ‘key person risk’, I see reasons to be cheerful here. The company also announced yesterday a return both to profitability and free cash flow. That reduces concerns that a liquidity crunch could lead to a rights issue that dilutes shareholders, as we saw in 2020. A large installed base of engines should help support revenues and profits for many years to come. The company’s strong reputation in the aircraft engine market is an ongoing competitive advantage. I would consider adding Rolls-Royce to my portfolio at its current share price.
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AG Barr
Famed US investor Warren Buffett is a long-term investor in soft drinks giant Coca-Cola. Such a business has the hallmarks of a classic Buffett investment. Its iconic brand has helped create a loyal customer base. That means the company is able to charge a premium price for its brand. That keeps profits flowing along with the drinks.
A smaller UK fizzy drinks maker nestling in the FTSE All Share index is AG Barr (LSE: BAG). The firm is best known for the legendary Scottish brand Irn Bru. The company said this month that it expects revenue for the year to be 18% higher than in the prior 12 months.
The company did warn that it is battling higher costs especially in packaging and energy. Such inflationary pressures could dent profits in coming years. But the power of a premium brand can help offset cost increases by enabling higher prices.
JD Sports
Although investors may have been looking to US tech stocks for growth in the past few years, I think a great growth story has been building in the UK retail sector. Sports and leisurewear seller JD Sports (LSE: JD) posted record revenues and profits in its interim results. Since then it has upgraded profit expectations – and last month it even upgraded the upgrade.
I would buy this FTSE All Share company
JD Sports is a well-oiled machine, now rolling out its proven retail formula in a variety of markets worldwide. Its expansion could help grow revenues and profits in the long term. I see risks with the strategy too. For example, its growing presence in the highly competitive US market could hurt JD’s profit margins if local retailers choose to fight it on price.
But JD Sports’ share price has fallen a third since November and 8% over the past year while the growth story looks stronger than ever to me. I would consider buying the shares today.
