2021 was an excellent year for UK shares. With the world adapting to the pandemic and operational disruptions slowly alleviating, many businesses have managed to get back on track. As a result, the FTSE 100 index achieved an impressive return of 14.2% – and that’s excluding the extra income from dividends.
Even with this rapid growth, I believe plenty of exciting opportunities remain for investors in 2022. With that in mind, I’ve spotted three UK shares that I think have the potential to explode over the next couple of years. Let’s explore.
E-commerce continues to surge
Lockdown restrictions may be over, but the popularity of online shopping continues to rise. According to the Office for National Statistics, the online sales percentage of total retail spending currently sits at around 30%. By comparison, before Covid-19 showed up, it was closer to 22%.
And this change in shopping behaviour hasn’t gone unnoticed. With almost all large retailers looking to capitalise on the shifting landscape, investments in online shopping platforms have surged. But this transition has created a massive problem when it comes to logistics. After all, simply having the ability to sell online is meaningless if the product can’t be delivered to a customer.
So these three UK shares, Clipper Logistics, Warehouse REIT, and Londometric Property, are helping retailers overcome these challenges.
Investing in logistics services & infrastructure may seem like a boring choice for investors looking to grow their wealth. But, as it stands, the UK is quickly running out of well-positioned warehousing space while demand continues to surge. At the same time, establishing an efficient delivery network can promptly turn into a nightmare – that’s why most businesses outsource it to logistics experts.
This ongoing situation has created some significant tailwinds for each of these companies. And with revenues already growing at double-digit rates, this boost in pricing power could help deliver impressive returns in 2022 and beyond.
Investing in UK shares isn’t without risk
As exciting as the prospect of tapping into this opportunity is, there are some reasons to be cautious. Firstly, these three companies are by no means the only players in the industry. The level of competition, even between each other, is high. And as more companies emerge to meet the rising level of demand, the competitive landscape could get even more challenging.
I think there is more than enough room to have multiple winners in this sector. However, should the industry eventually become oversaturated, the current rising trend of pricing power will likely reverse, taking profits with it. Needless to say, this would be bad news for these UK businesses and their share prices.
The bottom line
The competitive risks are concerning. However, with infrastructure already in place, I believe these three UK shares have the capability of staying on top. And with plenty of room for e-commerce left to grow, I don’t think the demand for logistical solutions will wane any time soon. That’s why I think these stocks are some of the best to add to my portfolio for the long term.
Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended Clipper Logistics, LondonMetric Property PLC, and Warehouse REIT. 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.
