Looking at the stock market at the moment, some shares seem overvalued to me. But there are plenty of others that I think continue to offer good value. If I wanted to put £1,000 to work in the stock market today, there are a couple of UK shares I would buy for my portfolio. Splitting the £1,000 evenly between them would provide me with at least some diversification.
Income choice: British American Tobacco
One FTSE 100 share that has been unloved by the market lately is British American Tobacco (LSE: BATS). The company owns iconic brands such as Lucky Strike. It is currently within spitting distance of its year lows.
Indeed, its share price is 1% lower than a year ago, at the time of writing this article earlier today. I see that as a buying opportunity. BATS is attractive to me for its income potential. With a yield of 8.5%, £500 put into BATS should earn me around £42.50 a year in dividend income. In fact, the company has raised its dividend annually for over two decades, so future dividend income could actually increase.
That is not guaranteed, though: dividends can always fall. After all, cigarette sales are declining in many markets, which could hurt revenues and profits. Then again, BATS has actually grown its revenues over the past few years by expanding its product portfolio and geographic reach. Its non-cigarette business is growing fast, with new category revenues reporting 40% higher sales in the first half than in the same period last year. A high income pick with growth potential is highly attractive to me. I see BATS as shares to buy now and would happily add more to my portfolio.
Growth shares to buy now: JD Sports
In contrast to the sluggish performance of the BATS share price, JD Sports (LSE: JD) has seen its shares add 36% over the past year, at the time of writing this earlier today.
That reflects the long-term growth story at the sports retailer, which I think is set to continue. Indeed the first-half profits at the company were its best ever. What’s the reason for this sort of success? I think it’s fairly simple: JD knows its audience very well, has a competitive buying skill and manages costs closely. As it continues its overseas expansion, I see opportunities to apply this proven retailing formula more widely. That could definitely be good for revenues, although it may come at the cost of profit margin dilution.
Given the increase in the JD Sports share price, there is also a risk that I could be overpaying if I put £500 in today. If results falter, the share price could fall. I recognise that but remain attracted by the company’s proven growth strategy and business performance. I still see substantial long-term opportunity in JD Sports, and would consider adding it to my portfolio today.
Christopher Ruane owns shares in British American Tobacco. The Motley Fool UK has recommended British American Tobacco. 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.
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