As the UK economy slowly reopens, I’ve been searching for UK shares to buy that could benefit from that reopening.
Here are three companies I’d buy ahead of the next stage of lockdown easing in May.
UK shares to buy
As commuters start to go back into the office and national travel resumes, I’d buy FirstGroup (LSE: FGP) as part of a basket of UK recovery shares. Throughout the pandemic, the public has been advised to avoid public transport, but I think this could be an excellent opportunity to buy the shares.
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As the world moves towards a more sustainable future, public transport demand is only likely to grow. I think this means that companies like FirstGroup could see increasing demand for their services.
Of course, it could also be years before the business returns to growth. Consumers may continue to shun public transport immediately after the pandemic. There’s also the risk of another wave of coronavirus. Despite these risks, I would buy the stock for my portfolio of UK shares today as a long-term recovery play.
Food to go
As well as FirstGroup, I’d also buy the manufacturer of convenience foods Greencore (LSE: GNC) for my portfolio of recovery stocks. Greencore relies on commuters for a large percentage of its food sales. Therefore, as the number of commuters has plunged over the past 12 months, so have the group’s revenues.
But as commuting numbers start to increase again, I think the company could see rising sales. It may also benefit from the fact that some businesses have exited the market during the pandemic. This could allow Greencore to capture their share, which may allow it to grow back bigger. This is the best-case scenario.
In the worst-case scenario, another wave of coronavirus could set the company’s recovery back years. Its weakened balance sheet may not be able to take another shutdown without more support. If Greencore does have to raise more cash from investors, it could send shares in the FTSE 250 business plunging lower.
Nonetheless, I would buy the company today for my portfolio of UK shares, considering its recovery potential.
Reopening trade
As pubs around the UK start to reopen after months of being closed, I would buy the City Pub (LSE: CPC) group too. After a rough 2020, this business is expected to turn a small profit of £600k this year. That’s not much, but it could be a considerable improvement on last year’s projected loss of nearly £8m.
City Pub has been building out its pub estate over the past few years. As it has acquired and built out new premises, sales rose from £15m in 2014 to £60m for 2019. That said, it could take some time for the business’s revenues to return to this level. However, I think its track record of growth suggests that when things are back to normal, management will drive City Pub in the right direction.
As such, I’d buy the stock for my portfolio of UK shares. The enterprise’s principal risks are rising costs that could slow its recovery and another wave of Covid. Both of these headwinds could work against the firm’s bounce-back. Therefore, this recovery play might not be suitable for all investors.
