I believe that now is a great time to buy UK shares. This is because prices of many quality companies remain well below their pre-pandemic levels. This provides long-term investors like me with a brilliant chance to nip in and grab a bargain (or two).
I’ve continued to load my Stocks and Shares ISA with top-notch British stocks despite the uncertain economic environment. And I’m on the lookout for more UK shares that might soar during the new bull market. Here are two that are on my radar today:
#1: Easy tiger
I believe the easyJet (LSE: EZJ) share price might be one of the strongest risers when the bull market kicks off. The amount people spend on non-essential items like holidays rises strongly during the early stages of economic upturns. But low-cost carriers like easyJet might be the aviation sector winners even if economic conditions remain difficult as demand for its cheap tickets will remain strong.
Besides this, rampant cost-cutting at easyJet has created a nimbler machine that will be more responsive to exploiting positive market conditions. As analysts at GlobalData comment: “drastic action taken by the airline to reduce its costs [following the Covid-19 outbreak] will benefit the carrier as it looks towards recovery and will mean the airline can competitively price its tickets, undercut the competition and win a larger market share”.
That said, a rising oil price poses significant danger to UK airline shares like these and their ability to bounce back into profit. The boffins at ING Bank said that they expect “ongoing upward pressure on oil prices throughout 2021”. This is a significant problem for the likes of easyJet as carriers spend between 15% and 30% of all expenses on fuel.
#2: A UK retail share that’s set to rebound?
I think buying Dixons Carphone (LSE: DC) shares might be a good idea for the new bull market as well. This isn’t just because of that aforementioned bounceback in broader consumer activity during economic rebounds. It’s because the UK retail share has doubled down on the fast-growing e-commerce channel and this is paying dividends. Dixons Carphone’s online market share rose in all territories in the 10 weeks to 9 January. And in its core UK and Ireland marketplace its share more than doubled year-on-year to 75%.
City analysts are expecting Dixons Carphone’s annual earnings to rebound strongly in the financial year to April 2022. This is based partly on hopes that Britons will go on a spending splurge when Covid-19 lockdowns are lifted. However, some reports suggest that this frenzy might fail to transpire. A survey by deVere Group for instance shows that 72% of respondents “appear to welcome having an extra financial buffer” and don’t plan to spend the majority of the savings they acquired during Covid-19 lockdowns. Softer-than-expected trade could well pull the Dixons Carphone share price much lower following recent strong gains.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.
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