June has flown by, but fortunately there’s still plenty of the summer left to look forward to. July is going to be another important month, with the Bank of England set to raise interest rates again and some half-year company reports due out. Here are the two top UK shares that I’m looking at buying with a spare £600 next month.
Banking on more rate hikes
The first company in my focus is Investec (LSE:INVP). The bank is split between operating in South Africa and the UK. It has performed well over the past year, with the share price up almost 55%.
A good amount of the gain can be attributed to a stellar performance over the last financial year (that runs March-March). Basic earnings per share jumped 106.3%. The increase in earnings was driven by growth in operating income.
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Funds under management grew by 9.2%, with net core loans up 13.2%. These were two key drivers that helped to boost profits. This is also why I think the business is a smart buy for me right now.
The higher the interest rate is, the more money the bank make on the funds and deposits. It also allows the bank to make a larger spread on the rate charged on loans. Given the fact that the Bank of England is likely to continue to raise rates this summer, I think Investec is going to continue to benefit from this.
I do think that the South African operations are a risk though. Even as they diversify the company, I’m aware of the instability that exists in that region and this could have a negative future impact.
An undervalued UK share
The second stock I think I’ll buy in July is Currys (LSE:CURY). In contrast to the share price performance of Investec, the Currys share price has fallen by 40% over the past year.
A key driver behind this move has been the lowering of profit guidance as the company has experienced problems. This has included supply chain issues, causing product availability problems. I think investors are also concerned about how consumer demand will hold up going forward, given the cost of living crisis.
Despite this, I think that the share price has been aggressively sold to the point of being undervalued. The business is still profitable, even if 2021 profit was much lower than pre-pandemic levels. As such, the price-to-earnings ratio sits at just 6.76. In my eyes, this is quite low and so does grab my interest.
I also disagree with the thinking that consumer demand will meaningfully fall due to a downturn in the economy. Products such as kitchen appliances and other household goods are staples. If my fridge breaks down, I’m going to find a way to buy another one! Further, the business has a good credit offering as well, providing an additional revenue line.
