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.”
7) Diageo plc (NYSE:DEO)
Number of Hedge Fund Holders: 31
Headquartered in London, the United Kingdom, Diageo plc (NYSE:DEO) is engaged in the production, marketing, and sale of alcoholic beverages.
Diageo plc (NYSE:DEO)’s competitive advantages stem from intangible assets, which create significant barriers to entry in some of its biggest categories. The cornerstone of the company’s evolving strategy revolves around pivoting away from its ‘affordable luxury’ narrative towards a more conventional staples business model. This transition is expected to lead to a more conservative but potentially more stable growth trajectory for Diageo plc (NYSE:DEO).
Its vast array of premium brands offers a solid foundation for strategic realignment, potentially providing a buffer against market volatility associated with luxury goods. Diageo plc (NYSE:DEO)’s ability to leverage its premium brand portfolio, such as Johnnie Walker, throughout various international markets places it well within the industry.
The transition towards a staples business model demonstrates that Diageo plc (NYSE:DEO) has been adapting to broader industry trends, favoring stability and consistent performance over the potential volatility of luxury markets. The transition is also expected to result in more consistent revenue streams and smoother earnings growth over time. Through leveraging the strong brand portfolio and global distribution network, Diageo plc (NYSE:DEO) can find opportunities to roll out more accessible product lines or bring innovation to the “everyday luxury” segment.
As per Wall Street, the shares of Diageo plc (NYSE:DEO) have an average price target of $147.00. Aristotle Capital Management, LLC, an investment management company, released its third-quarter 2024 investor letter. Here is what the fund said:
“Headquartered in London, England, Diageo plc (NYSE:DEO) is a global leader in the alcoholic beverages industry. The company has a vast portfolio of over 200 well-recognized premium spirits (~80% of FY 2024 sales), beers (~15% and mostly Guinness) and other beverages (~5%) that are sold in nearly 180 countries. Led by its Johnnie Walker brand, Diageo is the world’s largest exporter of Scotch whiskey—its largest category at ~25% of sales—followed by other spirits such as tequila and vodka (~10% each). Diageo also owns a ~34% stake in the premium champagne and cognac maker Moët Hennessy (a subsidiary of LVMH Moët Hennessy Louis Vuitton).
The company is the product of the 1997 merger between Grand Metropolitan and Guinness and the subsequent divestiture of its food-related businesses. M&A continues to be a part of Diageo’s strategy, as regional brands often dominate local markets (which provides further opportunities for mergers and industry consolidation). Over the last decade, Diageo has also meaningfully increased its presence in the rapidly growing tequila market with the acquisitions of Don Julio and Casamigos…” (Click here to read the full text)
6) Arm Holdings plc (NASDAQ:ARM)
Number of Hedge Fund Holders: 38
Arm Holdings plc (NASDAQ:ARM) designs and manufactures semiconductor technology and other related products such as computer processors, memory controllers, and storage devices. The company is headquartered in Cambridge, the United Kingdom.
Arm Holdings plc (NASDAQ:ARM)’s competitive advantage stems from the intangible assets and switching costs. The company’s strategic positioning in AI applications should continue to aid its growth prospects. As and when the demand for AI-capable devices grows throughout sectors, Arm Holdings plc (NASDAQ:ARM)’s chip designs will be preferred for their energy efficiency and performance characteristics. The adoption of its latest v9 architecture should drive increased royalty rates, potentially doubling the rate as compared to the previous v8 architecture.
Edge AI and the IoT offer additional avenues for expansion. As more devices need AI processing capabilities at the edge, Arm Holdings plc (NASDAQ:ARM)’s energy-efficient designs remain well-positioned to tap this growing market. Furthermore, its expansion into the data center market provides a significant growth opportunity.
Wall Street believes that Arm Holdings plc (NASDAQ:ARM)’s architecture remains well-suited for cloud computing workloads, providing a balance of performance and power efficiency. The company’s technological moat with energy-efficient designs and strategic positioning in AI and edge computing are some of its key strengths.
Arm Holdings plc (NASDAQ:ARM)’s ecosystem of software and design partners remains unprecedented. Its ecosystem of over 20 million software developers is the largest compute ecosystem. The company continues to increase investment in its ecosystem throughout all market segments. More Arm software developers result in more demand for the Arm compute platform, creating a virtuous cycle of demand.
5) BP p.l.c. (NYSE:BP)
Number of Hedge Fund Holders: 38
Headquartered in London, the United Kingdom, BP p.l.c. (NYSE:BP) offers carbon products and services. It operates through Gas & Low Carbon Energy, Oil Production & Operations, and Customer & Product segments.
BP p.l.c. (NYSE:BP)’s long-term growth trajectory is expected to be aided by a diversified energy portfolio and healthy brand recognition. The company continues to work on repositioning itself for future growth. It has a strong focus on returns and is diligently identifying new growth engines to drive its performance over the upcoming years. BP p.l.c. (NYSE:BP)’s shale business, BPX, is expected to be a significant contributor to its growth up to 2030. The shale sector’s capability to adjust production levels according to market conditions might offer the company valuable flexibility amidst the volatile energy market.
BP p.l.c. (NYSE:BP)’s investments in renewable energy and low-carbon technologies place it well to capitalize on the global energy transition. The company plans to update its mid-term strategy in February 2025, laying emphasis on cash flow generation and exploring organic acquisition opportunities. BP p.l.c. (NYSE:BP) has been refining its portfolio and continues to target significant cost savings moving forward. The company is confident in achieving a minimum of $2 billion of cash cost savings by 2026-end relative to 2023.
For 2024, in its Customers business, BP p.l.c. (NYSE:BP) is expecting growth from convenience, which includes a full-year contribution from TravelCenters of America, a healthier contribution from Castrol supported by volume growth in focus markets, and continued margin growth from BP pulse as a result of higher energy sold. Moreover, BP p.l.c. (NYSE:BP) continues to expect fuel margins to remain sensitive to the cost of supply.
As per Wall Street analysts, the shares of BP p.l.c. (NYSE:BP) have an average price target of $38.00.
4) Pentair plc (NYSE:PNR)
Number of Hedge Fund Holders: 40
Pentair plc (NYSE:PNR) offers various water solutions in the US, Western Europe, China, Eastern Europe, Latin America, the Middle East, Southeast Asia, Australia, Canada, and Japan. It is headquartered in London, the United Kingdom.
Pentair plc (NYSE:PNR)’s growth momentum is expected to be aided by its ongoing transformation efforts. It has been implementing an 80/20 strategy, focusing on the most profitable products and customers. The US Federal Reserve’s rate cuts are yet to stimulate the company’s rate-sensitive Residential and Pool businesses significantly.
Wall Street believes that the positive effects of the rate cuts will be visible in 6-9 months, potentially acting as a tailwind for Pentair plc (NYSE:PNR) in the coming quarters. A rise in consumer confidence and higher spending on home improvement should boost demand for pool construction, renovation, and maintenance services. This trend is expected to result in increased sales of Pentair plc (NYSE:PNR)’s pool equipment and water treatment products. Furthermore, a strong residential market might lead to cross-selling opportunities for the company’s other product lines, like water filtration systems for homes.
The residential market, which remains critical for the company’s Pool segment, should undergo a cyclical recovery. This expected upturn might fuel demand for Pentair plc (NYSE:PNR)’s products and services, mainly in the pool build and remodel categories. Moving forward, the company’s strategic pricing, operational efficiencies, and diverse product segments are expected to act as tailwinds. Notably, the pricing in the Pool segment has been projected to remain stable despite inflationary pressures.
Pentair plc (NYSE:PNR)’s strategic focus on its water portfolio, together with effective cost management and transformation initiatives, places it well for continued growth. Analysts at Stifel Nicolaus upped their price target on shares of the company from $101.00 to $115.00, giving a “Buy” rating on 16th October.
3) Willis Towers Watson Public Limited Company (NASDAQ:WTW)
Number of Hedge Fund Holders: 47
Based out of London, the United Kingdom, Willis Towers Watson Public Limited Company (NASDAQ:WTW) operates as an advisory, broking, and solutions company.
Willis Towers Watson Public Limited Company (NASDAQ:WTW)’s sticky client base should continue to provide it with a competitive edge. The company announced strategic partnerships and divestitures, which include the sale of TRANZACT and investment in Atomos. It remains optimistic about its growth trajectory, which stems from strategic talent investments and specialization. Willis Towers Watson Public Limited Company (NASDAQ:WTW) remains focused on maintaining resilience with the help of strategic adjustments.
In its Q3 2024 earnings call, the company highlighted that current interest rates have been driving demand for pension-derisking strategies. Wall Street remains optimistic about Willis Towers Watson Public Limited Company (NASDAQ:WTW)’s transformation program. The company expects to deliver ~$450 million of cumulative run-rate savings from the transformation program by 2024 end, with total program costs of $1.175 billion. Moving forward, the company’s Risk & Broking business is expected to be aided by strong organic growth and margin improvements.
Since global businesses are facing increasingly complex risks, the demand for sophisticated risk management and insurance brokerage services is anticipated to increase. On October 28, Willis Towers Watson Public Limited Company (NASDAQ:WTW) managed to secure an insurance license to operate as a broker in Saudi Arabia. This strategic step expands its global footprint. Furthermore, on October 29, 2024, it rolled out a new insurance brokerage service in Japan, which aids in strengthening its Corporate Risk & Broking business.
As per analysts, the company’s strategic focus on expanding its services and making entries into new markets should form the base of long-term growth. Roth Mkm upped its price target on the shares of Willis Towers Watson Public Limited Company (NASDAQ:WTW) from $315.00 to $345.00, giving a “Buy” rating on 2nd October.
2) AstraZeneca PLC (NASDAQ:AZN)
Number of Hedge Fund Holders: 49
AstraZeneca PLC (NASDAQ:AZN) is a biopharmaceutical company, which focuses on the discovery, development, manufacture, and commercialization of prescription medicines. It has its headquarters in Cambridge, the United Kingdom.
AstraZeneca PLC (NASDAQ:AZN)’s growth is expected to be led by 3 factors. These are patents, economies of scale, and a powerful distribution network. The company has a strong focus on oncology products and strategic expansion into new therapeutic areas. Its product lineup is anchored by its oncology offerings, with drugs including Enhertu, Tagrisso, and Imfinzi as key differentiators. AstraZeneca PLC (NASDAQ:AZN)’s supplemental New Drug Application (sNDA) for CALQUENCE® (acalabrutinib) was accepted and granted Priority Review in the US for the treatment of adult patients with previously untreated mantle cell lymphoma.
The company has seen numerous product approvals throughout various therapeutic areas. European regulators recommended approval for an endometrial cancer treatment. Also, they have accepted an application for COVID-19 pre-exposure prophylaxis in immunocompromised patients. Furthermore, in China and Japan, Tagrisso has received approval as a first-line treatment for EGFR-mutated advanced lung cancer.
Wall Street analysts remain optimistic about AstraZeneca PLC (NASDAQ:AZN)’s strategic initiatives, which include pursuing strategic acquisitions to bolster its growth prospects. Some of the recent acquisitions are Amolyt Pharma and Fusion Pharmaceuticals. These should enhance AstraZeneca PLC (NASDAQ:AZN)’s portfolio and pipeline. AstraZeneca PLC (NASDAQ:AZN) remains focused on expanding its breast cancer franchise and moving antibody-drug conjugates into earlier lines of therapy in a bid to replace standard chemotherapy.
TD Cowen upped its price target on shares of AstraZeneca PLC (NASDAQ:AZN) from $90.00 to $95.00, giving a “Buy” rating on 12th August. Parnassus Investments, an investment management company, released the Q2 2024 investor letter. Here is what the fund said:
“AstraZeneca PLC (NASDAQ:AZN) gained after announcing robust first-quarter results and setting 2030 targets at an Investor Day that were above consensus expectations. We continue to believe that AstraZeneca’s robust pipeline and industry-leading innovation in oncology should support above-expectation revenue growth for the next several years.”
1) Linde plc (NASDAQ:LIN)
Number of Hedge Fund Holders: 63
Based in Woking, the United Kingdom, Linde plc (NASDAQ:LIN) carries out operations as an industrial gas company in the Americas, Europe, the Middle East, Africa, Asia, and the South Pacific.
Linde plc (NASDAQ:LIN)’s growth trajectory is expected to be aided by its competitive advantages, such as switching costs and intangible assets. A critical driver of the company’s future growth prospects is its ambitious clean hydrogen strategy. Linde plc (NASDAQ:LIN) agreed to supply clean hydrogen to Dow Inc’s ‘Path2Zero’ project in Alberta, Canada. This investment has placed Linde plc (NASDAQ:LIN) as a front-runner in the clean hydrogen market and was aligned with broader trends supporting higher demand for Canadian natural gas.
The use of ATR technology, which needs natural gas as feedstock, should contribute positively to the long-term demand for natural gas in the region. Wall Street analysts opine that the clean hydrogen market has an optimistic outlook, which stems from the industries and governments seeking to reduce carbon emissions and transition to more sustainable energy sources.
Linde plc (NASDAQ:LIN)’s large-scale projects, like the clean hydrogen production site in Canada, exhibit its focus on becoming a leader in this emerging market. With the expansion of the hydrogen economy, the company is expected to benefit from elevated demand for its production technologies, distribution infrastructure, and end-use applications throughout industries, such as transportation, power generation, and industrial processes.
Analysts at Bank of America upped their price target on the shares of Linde plc (NASDAQ:LIN) from $495.00 to $516.00, giving a “Buy” rating on 5th August. Aristotle Atlantic Partners, LLC, an investment advisor, released its third quarter 2024 investor letter. Here is what the fund said:
“Linde plc (NASDAQ:LIN) is the largest industrial gas company worldwide and a major technological innovator in the industry. The company produces atmospheric gases like oxygen, nitrogen, argon, and rare gases through air separation processes, with cryogenic air separation being the most prevalent. They also have technologies to produce blue and green hydrogen, which are considered clean energy. Linde uses three basic distribution methods for industrial gases: on-site or tonnage, merchant or bulk liquid, and packaged or cylinder gases. These methods are often integrated, with products from all three supply modes coming from the same plant. The method of supply is determined by the lowest cost means of meeting the customer’s needs.
Linde holds a leading market share in a consolidated industry, with expected revenues of approximately $34 billion in 2024. The company has consistently grown its earnings throughout economic cycles due to its exposure to both cyclical end markets and is secured by long-term supply agreements of at least three years, providing defensive characteristics to its operating model. We see a robust backlog and pipeline driven by attractive growth end markets and significant decarbonization opportunities with operational discipline from management.”
While we acknowledge the potential of LIN as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than LIN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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