£1k to invest? 2 UK shares I’d buy in an ISA today

These UK shares could produce large total returns for investors in the years ahead as growth tailwinds help drive earnings.

| 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.

If you have a lump sum of £1,000, or any other amount to invest, I think it could be sensible to buy UK shares in an ISA. With that in mind, here are two companies I’ve got my eye on today. 

UK shares to buy

Hikma Pharmaceuticals (LSE: HIK) has been one of the best-performing stocks on the London market this year. Investor sentiment towards the pharmaceutical group has improved because it supplies several of the drugs required to treat coronavirus

Thanks for the growing demand for these drugs, City analysts are expecting the company to report earnings per share for the year of $1.70. That’s up from $1.50 at the beginning of the year. 

There are other reasons why I think Hikma could be one of the best UK shares to buy today. The demand for healthcare around the world is only growing, and the company is one of the largest producers of low-cost generic treatments.

For emerging and developing economies, these low-cost products are vital. As such, Hikma has a very defensive nature and is likely to continue to produce steady returns for investors for many decades to come. 

Over the past five-years, Hikma’s bottom line has doubled, thanks to the growing demand for pharmaceutical products around the world. The company’s own research and development efforts have helped improve growth. With profits surging, Hikma has become a dividend champion. Its payout has grown at a compound annual rate of 17% since 2014. Today, the stock supports a dividend yield of 1.5%.

In my opinion, this income potential, as well as the company’s long-term growth outlook, is highly exciting. These qualities are relatively unique among UK shares. 

Rentokil Initial

Pest control business Rentokil Initial (LSE: RTO) has achieved a similar rate of growth to Hikma over the past five years. The company’s long-term outlook is also extremely attractive.

The company is potentially one of the best-known pest control businesses in the UK. Demand for its services is only growing. Scientists believe climate change is contributing to rising pest levels. That’s terrible news for the planet, but potentially good news for pest control businesses.

On top of this organic growth, Rentokil has a strong track record of buying up smaller competitors and integrating them into the wider business. As the company grows, it looks as if this trend will continue. The pest control market is large but highly fragmented. Rentokil is one of the few businesses that has the size and skill to acquire smaller competitors

As such, I think it may be worth acquiring the stock as part of an ISA portfolio of UK shares. The company has significant growth potential in the years ahead, which could lead to large total returns for investors. Even if the stock does look expensive at current levels, I think it’s a price worth paying to buy this UK growth champion.

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.

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Hikma Pharmaceuticals. 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

US Stock

The Nvidia share price falls! Here’s what I think happens next for the S&P 500

Jon Smith reviews the overnight results from Nvidia and explains why this could stall the S&P 500 performance through to…

Read more »

Investing Articles

Down 15% today, is this FTSE 100 share too cheap for me to miss?

JD Sports' share price has tanked after the FTSE 100 share released another profit warning. Is this the opportunity I've…

Read more »

Investing Articles

Up 8% today, is this FTSE 100 growth stock a slam-dunk buy for me?

Halma's share price is soaring thanks to another headline-grabbing trading update. Is the FTSE 100 stock now too good for…

Read more »

Investing Articles

With a P/E ratio of just 10.5 is now a brilliant time to buy a cut-price FTSE 250 tracker?

Harvey Jones says a recent dip in the FTSE 250 leaves the index trading at bargain levels. One stock in…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

To build a passive income flow, I’d follow this Warren Buffett approach

Warren Buffett has set up passive income streams most people can only dream about. Our writer sees some practical lessons…

Read more »

Growth Shares

As the boohoo share price falls, could it become a penny stock in 2025?

Jon Smith outlines some of the recent problems involving the boohoo share price and considers if things could get even…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

Here are the worst-performing FTSE 100 shares over the last 5 years

These five FTSE 100 shares have been complete duds over the last half decade. But is there potential for a…

Read more »

Investing Articles

Nvidia stock has tripled this year! Can it keep rising?

Nvidia's latest sales update showed strong growth and the stock's been on a tear so far in 2024. So is…

Read more »