Buying a basket of UK shares in an ISA could be a great way to build your financial nest egg in the long run. With that in mind, I’m going to take a look at two companies with bright long-term prospects I’d buy right now.
UK shares to buy right now
Financial services group Plus500 (LSE: PLUS) has been one of the few big winners of 2020. The spread betting and CFD provider has seen a surge in new business as traders have rushed to place their bets on the volatile financial markets.
The company’s latest trading update showed record revenues for the first half of 2020. Analysts are now expecting the group to report 100% earnings growth for 2020. But as this was a one-off event, it’s unlikely Plus500 will be able to repeat this performance any time soon.
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However, Plus is one of the biggest trading firms in the UK, and this is its main competitive advantage. It also helps the organisation stand out among UK shares. It’s well recognised by consumers, so management doesn’t have to spend as much on advertising as other firms.
Another benefit of this competitive advantage is large profit margins, reporting an average of 57% since 2014. That puts the company in the top 20% of the most profitable corporations listed on the London market.
With these large profit margins, Plus can return large amounts of cash to investors. The stock is set to yield 4.5% this year. Management has also been using cash to repurchase the company’s shares.
Right now, shares in Plus500 are dealing at a forward price-to-earnings (P/E) multiple of 7.4. That’s half of the financial services sector average and makes it one of the cheapest UK shares.
Therefore, I think now could be a great time to snap up a share of this business while it trades at a bargain price.
Top ISA buy
Another stock I’d buy for an ISA right now is Rio Tinto (LSE: RIO). I think Rio could be the perfect addition to a basket of UK shares in an ISA because the business is a dividend champion.
As the world’s largest iron ore producer, Rio has the largest profit margins in the sector. The company has been using this cash to reduce debt and pay investors in recent years.
After several years of aggressively paying down debt, management has now switched its focus to shareholder returns. In its last financial year, Rio returned $12bn (£9bn) to investors. That’s 12% of the corporation’s current market capitalisation.
For 2020, City analysts are forecasting a total dividend yield of 6.5%. Clearly, the company has the funds to pay out more if it wanted, but 2019 was a record year for the group. Still, 2019’s cash returns showcase Rio’s impressive dividend credentials.
Once again, this income champion looks cheap. The stock is dealing at a forward P/E of 10.6. Based on this, and the company’s cash return potential, I reckon Rio could be one of the best UK shares to add to an ISA today.
