Lately, I have been thinking about how I would put £10,000 to work in the stock market at the moment. I have compiled a list of shares to buy now for my portfolio. It is split evenly between growth and income approaches. If I put £1,000 into each of the 10 shares, I would reduce my risk thanks to diversification. Here, in no particular order, are the 10 shares I would choose.
UK growth shares in retail
Two of the companies are clothes retailers. Lately, they have had different business results, but I reckon both of them could keep growing fast in coming years. Boohoo has seen its share price collapse. The former stock market darling has often been trading close to penny share status recently. Investors have been scared off by negative publicity about the working conditions at suppliers to the online retailer. But that is not the only concern.
Inflation in the supply chain has been mounting, leading the company to lower its financial expectations for the current year. I think that is already reflected in the boohoo share price, though. The company has been expanding aggressively, including in the massive, though challenging, US market. It will take effort to manage its cost base in an inflationary environment. But the company has proven its business model and I am confident it can keep growing strongly in future.
Sportswear specialist JD Sports has also proven its business model. Unlike boohoo, its business is on a tear. It has upgraded expectations for its full-year results after its strongest first half of trading ever. The model is straightforward, and that brings the risk of competition that could hurt profit margins. But as it expands its overseas footprint, I expect JD to do well from the ongoing rise of casualwear. Its portfolio of brands allows it to compete in different sectors of the market. I think that means it still has large untapped opportunities in front of it.
Bringing home the bacon
Folk wisdom says where there’s muck, there’s brass. A pig sty can be a fairly mucky place, and I expect continued positive financial news from pork producer Cranswick. Limited supply combined with growing global demand make for a winning business opportunity. Cranswick’s decades of experience in the meat industry mean that it is well-positioned to capitalise on that. I think its growth credentials are reflected in the fact that both earnings per share and the dividend saw double-digit percentage growth last year. Changes to export and import rules are always a risk for a meat company selling into global markets and could lead to lower revenues or profits.
Digital focus
I would also consider a couple of tech shares to buy now for my portfolio. Digital ad agency group S4 Capital has had a rough start to 2022. The tech sell-off has hurt the share price at S4, many of whose clients are tech companies. I think the long-term growth story remains intact, though. The company has maintained its guidance of doubling revenues and gross profits organically over a three-year period. On top of that it remains on the acquisition trail and has already announced its first deal of 2022. But such rapid growth can increase overhead costs, which could hurt profit margins.
Another tech share beaten down lately is kidney diagnostic specialist Renalytix. I feel this is a risky choice as for now the company has very small revenues. But its proprietary technology has been receiving growing clinical proof to support sales efforts. The company has expanded its sales team rapidly to capitalise on them. That adds costs, which could hurt profit margins. But at its current share price and with a large potential customer market, I would happily buy Renalytix for my portfolio.
Income shares in financial services
A couple of income shares I would choose for my portfolio operate in the financial services sector. Investment manager M&G yields 8.5% and management has said that it plans to maintain or raise the dividend level in future. Dividends are never guaranteed and there is a risk that if M&G’s investment performance is too weak, its customers will switch to other providers. That could hurt revenues and profits. But I think the company’s established brand and wide customer base could help it perform well enough in coming years to support the tasty dividend.
Insurer and financial services provider Legal & General also benefits from a strong brand, with its multi-coloured umbrella logo helping to attract customers. Its large customer base helps it produce strong profits and fund an attractive dividend. Currently the shares yield 6.1%. I would happily tuck them into my portfolio. Like all financial services providers, any economic downturn might hurt demand at Legal & General. That could see fewer customers and lower profits.
UK shares to buy now: high yielders
I will round out my list of shares to buy now for my portfolio with a trio of high-yielding companies.
Tobacco giant Imperial Brands offers a dividend yield of 8.0%. It cut its dividend in 2020 and the risk of falling cigarette use hurting profits continues to stalk the company. But the company has taken moves to combat that risk, including trying to build its market share in key countries. Price increases will hopefully mitigate volume declines and help support the company’s dividend.
A far smaller company is the venture capital trust Income and Growth. But at 9.6%, there is nothing small about its dividend yield. By investing in early stage businesses, the company can benefit from their growth — if it happens. That strategy has proven lucrative. Such investments can carry significant risks of underperformance, though. That means that the trust’s dividend can move around a lot. Dividends are never guaranteed.
Finally I would buy natural gas and oil producer Diversified Energy for my portfolio. Its dividends are paid quarterly and the current annual yield is 11.1%. Diversified could benefit from current strength in energy prices. It has a large estate of aging wells that need to be capped when they reach the end of their productive lives. That could add significant costs to the company’s bottom line, damaging earnings. With a double-digit percentage yield, I can live with that risk. I have added Diversified into my portfolio.
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Christopher Ruane owns shares in Diversified Energy, Imperial Brands, JD Sports, Renalytix and S4 Capital. The Motley Fool UK has recommended Imperial Brands and boohoo group. 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.
