In this article, we will discuss the 10 Best UK Stocks to Invest in Now.
The OBR (Office for Budget Responsibility) anticipates economic output in Britain to expand by 1.8% in 2026 and by 1.5% in 2027. In September 2024, KPMG reported that The Bank of England might take a more cautious approach when it comes to easing monetary policy as compared to the Fed and the ECB, with gradual cuts resulting in the UK base rate to 3.5% by 2025 end.
Furthermore, the labour market will continue to loosen, with fewer vacancies, and subdued pay growth but a relatively modest rise in the unemployment rate. KPMG went on to add that business investment might see some recovery next year if geopolitical uncertainties ease and the impact of reduced rates and the improving growth outlook offer businesses the confidence to commit to their investment plans.
What to expect from the UK Economy?
As per the new EY ITEM Club Autumn Forecast, the UK economy should grow 0.9% in 2024, down from the 1.1% growth expected in July’s Summer Forecast. The downgrade exhibits that household savings are now lower than expectations, providing less scope for consumers to increase their spending. Furthermore, lower-than-anticipated increases in consumer spending, together with cautious rate cuts to the Bank Rate, demonstrate that UK growth is expected to be steady rather than rapid over the upcoming 2 years.
EY added that business investment is expected to accelerate moderately in the coming years, with rate cuts providing a boost to the private sector. Therefore, the UK business investment should grow to 1.3% in 2024, an increase from the 1% expected earlier. Private sector investment is anticipated to accelerate to 3% in 2025, demonstrating a small downgrade from projections of 3.2% growth in its Summer Forecast.
Inflation Outlook for the UK Economy
EY expects that inflation is expected to average 2.6% in 2024 before falling marginally to 2.5% in 2025 and 2.1% in the following year. The firm believes that this ‘stickiness’ is because of several factors, such as tightness in the broader labour market, and the gradual slowing of pay growth. With spending growth anticipated to be lower than the earlier expectations because of reduced household saving rates, it projects consumer spending to rise by 0.8% in 2024.
EY expects that gradual cuts to the Bank Rate might provide some benefits to the UK’s housing market. It projects house price growth of 1.7% in 2024, and 2.1% in 2025, with declining borrowing costs anticipated to help offset other affordability challenges. Notably, the looser monetary policy is expected to have a modest impact on growth over the short term. Several borrowers on fixed rates will not experience the decline in their mortgage payments and a significant minority might refinance a fixed mortgage to a higher rate, despite a decline in Bank Rate.
Stocks
Our Methodology
To list the 10 Best UK Stocks to Invest in Now, we used a screener to extract UK stocks. Next, we narrowed our list by selecting the ones having high hedge fund holdings. Finally, the stocks were ranked in an ascending order of their hedge fund sentiments, as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best UK Stocks to Invest in Now
10) NatWest Group plc (NYSE:NWG)
Number of Hedge Fund Holders: 11
NatWest Group plc (NYSE:NWG) offers banking and financial products and services to personal, commercial, corporate, and institutional customers in the UK and internationally. The company is headquartered in Edinburgh, the United Kingdom.
Wall Street analysts remain optimistic about NatWest Group plc (NYSE:NWG)’s acquisition of retail banking assets from Sainsbury’s Bank, including credit cards, personal loans, and savings accounts. This transaction is expected to be completed in H1 2025. The transaction provides a great opportunity to accelerate the growth of NatWest Group plc (NYSE:NWG)’s Retail Banking business at attractive returns. Given the complementary customer base, the transaction should add scale to its credit card and unsecured personal lending business within existing risk appetite.
This transaction is expected to have a 20-bps point impact on NatWest Group plc (NYSE:NWG)’s CET1 ratio upon completion and be EPS and RoTE accretive after completion. With customer activity increasing, defaults remaining low, and optimism surrounding the businesses and consumers, the company appears to be well-placed to continue its long-term growth trajectory.
While NatWest Group plc (NYSE:NWG) continues to expect to achieve a return on tangible equity of greater than 13% in 2026, it appears to be well-placed to deliver on its commitments to shareholders amidst the evolving economic landscape. Moving forward, disciplined growth throughout lending, deposits, and AUMA (Assets Under Management and Administration) should continue to aid its business fundamentals.
For FY 2026, NatWest Group plc (NYSE:NWG) is targeting a CET1 ratio of between 13% – 14% and expects RWAs to be ~£200 billion at 2025 end, including the impact of Basel 3.1 on a pro-forma basis. It expects the impact of Basel 3.1 to be an uplift of ~£8 billion on 1 January 2026.
9) Unilever PLC (NYSE:UL)
Number of Hedge Fund Holders: 21
Unilever PLC (NYSE:UL) operates as a fast-moving consumer goods (FMCG) company in the Asia Pacific, Africa, the Americas, and Europe. The company has its headquarters in London, the United Kingdom.
Unilever PLC (NYSE:UL)’s entrenchment in the retailers’ supply chain, brand power, and cost advantage are some measures that can provide it with a competitive edge. Pricing is expected to be the main driver of top-line growth. Unilever PLC (NYSE:UL)’s focus on refining market strategies in Indonesia and China should yield positive results. Experts believe that the expected benefits in Indonesia should be visible by H2 2025. They expect moderate pricing adjustments amidst rising commodity costs.
Unilever PLC (NYSE:UL)’s Growth Action Plan (GAP) is expected to transform long-term performance, with a strong emphasis on brand development and net productivity. The operational improvements and strategic innovations under the GAP should continue to bear fruit. Its commitment to brand development remains evident in the positive volume growth and resilience in key markets like North America.
In Q3 2024, Unilever PLC (NYSE:UL) saw underlying sales growth of 4.5%, with volume growth rising to 3.6%. The company highlighted that its productivity programme and separation of the Ice Cream business remain on track. The separation activity is expected to be completed by 2025 end. The separation is expected to result in a more focused Unilever PLC (NYSE:UL). This means it will be a simpler business, with a focused portfolio. During the quarter, the underlying sales growth was aided by its Power Brands, with strong performances mainly coming from Dove, Liquid I.V., Comfort, and Magnum. Notably, price growth moderated in line with its expectations.
For FY 2024, the company expects underlying sales growth of 3% – 5% and an underlying operating margin of at least 18%. Bank of America upped the shares Unilever PLC (NYSE:UL) from an “Underperform” rating to a “Buy” rating, increasing the price objective from $47.00 to $72.00 on 22nd August. Polen Capital, an investment management company, released its fourth-quarter 2023 investor letter. Here is what the fund said:
“Unilever PLC (NYSE:UL) was a relative underperformer during the fourth quarter though this underperformance appears to us to be less a factor of any specific fundamental issues with the company. Rather, it seems more a result of consumer staples companies like Unilever underperforming during a quarter in which the broad market rallied sharply through much of November and December.
UK-based Unilever, among the largest consumer goods companies in the world, has navigated the last few years well. During the post-COVID inflation surge, Unilever’s brands enjoyed consistent pricing power and delivered higher-than-average revenue growth. Recently, signs of softening consumer spending have appeared. Inflation measures are now softening, and at the margin, consumers are switching away from branded goods in favor of generic products. Considering decelerating growth, we trimmed our Unilever position and added to Medtronic.”
8) CNH Industrial N.V. (NYSE:CNH)
Number of Hedge Fund Holders: 30
CNH Industrial N.V. (NYSE:CNH) is an equipment and services company, which is engaged in the design, production, marketing, sale, and financing of agricultural and construction equipment. The company has its headquarters in Basildon, the United Kingdom.
CNH Industrial N.V. (NYSE:CNH)’s growth outlook is supported by its intangible assets and switching costs. The company is critical in mechanizing crop production and boosting farmers’ productivity. This is expected to further strengthen its brand loyalty among farmers, stretching back generations. CNH Industrial N.V. (NYSE:CNH) has consistently offered customers reliable, high-quality products while, at the same time, working to reduce the total cost of ownership. Moving forward, the company is expected to benefit from solid replacement demand even though agriculture commodity demand moderates, prompting farmers to refresh their machinery fleet.
CNH Industrial N.V. (NYSE:CNH) has opportunities to improve its construction business by optimizing its product portfolio and dealer network. Furthermore, higher infrastructure spending in the US and emerging markets results in more construction equipment purchases. The U.S. Machinery & Construction industry possesses a positive outlook, offering a favorable environment for CNH Industrial N.V. (NYSE:CNH)’s operations. Wall Street believes that its strong position in the agricultural sector should form a base of solid foundation for growth.
The company’s cost-out initiatives should act as a key differentiator in the current economic cycle. CNH Industrial N.V. (NYSE:CNH)’s ability to effectively manage cost structure, primarily during challenging times, is expected to act as a tailwind. The strategic focus on operational efficiency should result in lower Cost of Goods Sold (COGS), offsetting increased Selling, General & Administrative expenses.
As per Wall Street analysts, the shares of CNH Industrial N.V. (NYSE:CNH) have an average price target of $14.25. Parnassus Investments, an investment management company, released the second quarter 2024 investor letter. Here is what the fund said:
“Within industrials, we exited CNH Industrial N.V. (NYSE:CNH) following the CEO’s surprise resignation. We think the recent unexpected departure of CEO Scott Wine creates significant risk to our thesis that CNH Industrial will be able to execute on its operational improvement plan.”