Top
Image Alt

The Investing Box

  /  Editor's Pick   /  With a spare £500, I’d consider these as shares to buy

With a spare £500, I’d consider these as shares to buy

Smiling senior white man talking through telephone while using laptop at desk.

No matter what is happening in the market, I always keep an eye out for shares to buy. If I can find a great company with an attractive share price, it could make a lucrative addition to my portfolio.

Right now, if I had a spare £500 to invest, I would consider the two below.

Persimmon

When a share has a yield approaching 14%, my first question is always whether there is a reason for that. Such a high yield can signal elevated risk in many situations.

Is that the case at housebuilder Persimmon (LSE: PSN)? It has a 13.5% yield right now, after all.

I think the unusually rewarding dividend reflects investor nervousness. The Persimmon share price has tumbled two-fifths in the past year. With the economy getting weaker and price inflation threatening consumer spending, there is a concern that the housing market will falter. That could hurt both revenues and profits at homebuilders like Persimmon.

I definitely recognise that risk. Indeed, in its interim results yesterday the company revealed that its new home completions slipped by a tenth in the first half of the year compared to the same period of the prior year. Group revenues also fell. Those performance indicators could suggest that Persimmon is already seeing some impact from shifts in the housing market that could get worse.

Is Persimmon still a buy?

But the picture is mixed. The new home average selling price moved up. Persimmon basically maintained its gross margins, which in an inflationary environment is a good performance. It remains highly profitable. Although the first half profits were lower than last year, they still came in at a substantial £440m.

The company continues to pay its dividend. It said demand is strong and that the second half has started well. Although cost inflation is a challenge, it noted that selling prices are also moving up. That could help it maintain its margins. With a strong brand, proven business model, attractive profit margins and sizeable dividend, I see Persimmon as among the shares to buy now for my portfolio.

boohoo

Another share I would consider buying right now is boohoo (LSE: BOO). The online retailer has had a tough year and its share price has tumbled 80% in that period.

There are reasons to be gloomy. Cost inflation is a big challenge for many businesses, but that is especially true for a retailer focused partly on very low selling prices. Last year, profits at boohoo collapsed and the company reported a small loss.

But it continued to grow revenues. I think its popularity with customers could help it continue to increase sales in future. If it can get its cost base and selling prices right without losing too many customers, boohoo ought to be able to be highly profitable again even if that takes a few years. As a believer in long-term investing, I think today’s share price in pennies could turn out to be a bargain for my portfolio.

The post With a spare £500, I’d consider these as shares to buy appeared first on The Motley Fool UK.

6 shares that we think could be the biggest winners of the stock market crash

The hotshot analysts at The Motley Fool UK’s flagship share-tipping service Share Advisor have just unveiled what they think could be the six best buys for investors right now.

And while timing isn’t everything, the average return of their previous stock picks shows that it could pay to get in early on their best ideas – particularly in this current climate!

What’s more, all six ‘Best Buys Now’ are available to access right now, in just a few clicks.

Learn more

setButtonColorDefaults(“#5FA85D”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#FFFFFF”, ‘color’, ‘#FFFFFF’);
})()

More reading

C Ruane has positions in boohoo group. The Motley Fool UK has recommended 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.