Buying UK shares according to how you think their prices will move in the short term is a dangerous game. It’s a particularly perilous endeavour following the 2020 stock market crash and the subsequent fragility of investor confidence. The best stocks to buy are those whose share prices you feel confident will rise over a longer time horizon.
I’m not saying that you shouldn’t consider the possibility of near-term share price gains. It’s just that this should always play second fiddle to the bigger picture. The key to successful investing is to buy quality UK shares with clear advantages over their competitors (or ‘economic moats’), that have strong balance sheets and which are serious operators in growing markets.
Those who make fortunes from UK shares do so over a number of years, not several weeks or months. And these are the sort of stocks to buy if you want to make a fortune from your investment portfolio. But as I say, buying companies like this in view of potential near-term price drivers can help give your final shareholder returns an extra little jolt.
Great stocks to buy in August With that in mind, I reckon Centamin (LSE: CEY) is one of the top stocks to buy for August. This is a well-run gold mining stock with a strong balance sheet and a terrific track record on the production front. Output rose by a better-than-expected 11% during the second quarter, most recent data showed.
I’m tipping Centamin to provide terrific returns over the next decade because I expect gold prices to rocket in value. But investors don’t have to wait long for bullion prices to explode. Yesterday they hit nine-year peaks above $1,815 per ounce. And there’s plenty of worry out there, whether related to Covid-19, Brexit, or low interest rates to drive gold still higher in August.
Such a scenario would lift the share prices of Centamin and its peers too. An undemanding forward price-to-earnings (P/E) ratio of 14 times provides scope for meaty share price gains. And a dividend yield north of 5% makes this a terrific buy for income chasers today.
A FTSE 100 stock with a 6% dividend yield I consider Admiral Group (LON:ADML) (LSE: ADM) to be one of the best dividend stocks to buy before next month too. At today’s prices, the FTSE 100 stock boasts an even-better 6% dividend yield for 2020. I reckon the release of half-year results on August 12 could lift the insurance giant’s share price.
In economic downturns like this, investors flock to stocks that illustrate any sort of trading resilience. I’m expecting Admiral, a major player in the car insurance market, to do just that next month. General insurance demand remains broadly robust whatever broader economic conditions are like. And especially so in the motor market where insuring your car is a legal obligation.
I also expect more strong comments surrounding Admiral’s balance sheet. Back in April the FTSE 100 firm lauded its “strong solvency position” that it said was “well above its target level and regulatory thresholds.” Admiral’s robust balance sheet is one of its most appealing qualities, one that should ensure chunky dividends for years to come. I’d happily buy this blue-chip dividend stock for my own ISA.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Admiral 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.
Motley Fool UK 2020