Buying the right stocks is no mean feat. It takes a solid strategy to buy stocks that can deliver value appreciation long term.
So what are the best UK stocks to buy or put on a watchlist today? Quantum Blockchain (QBT), Flutter Entertainment (FLTR), Deliveroo (ROO), Wise (WISE), and Glencore (GLEN) are top stocks to include in a portfolio today.
The easy money policies that were prevalent all through the pandemic period are coming to an end. The ECB is one of the major central banks that have already signaled the end of the bond-buying frenzy that has been the norm for the past year. This could slow down the stock markets in the short term.
The effects are already being felt in the market. Last week, the FTSE 100 had its worst week since mid-August. This came immediately after the ECB announced its step to end the monetary policies that have dominated the market since 2020.
While it has bounced back, driven by financials stock, this kind of volatility is likely to persist for a while.
Best Stocks To Buy: The Important Ingredients
There are lots of stocks in the FTSE 100, the FTSE 250, and other indices. When looking to invest, the goal is to find those with the potential for most returns and a lower risk of wealth erosion in the event of a correction.
While this can be a daunting task for most investors, there are time-tested steps that one can follow and lower the risk of buying low-quality stocks.
The first step is to look at the potential growth prospects of an entire sector. The best stocks to buy are those in sectors that are showing strong prospects of growth. The idea is that as the sector expands, so will the value of the key players in it. For context, Tesla has grown so fast in such a short time because it is the dominant player in the fast-growing electric vehicles market.
Once one has identified a sector with strong growth prospects, the next step is to look at the internal fundamentals of the stock itself. This entails looking at the financial records such as revenue growth and gross profit margins. This gives an idea of how strong a company’s value proposition is in the market.
The other factor to consider is a company’s books. Some aspects of a company’s balance sheet that point to its health are the current ratio and the cash flows.
The current ratio usually gives an idea of how well a company’s assets are managed. If it’s one and above, it is usually an indicator that a company has enough current assets to meet its current liabilities. On the flip side, a company with a current ratio of less than 1 is usually at risk of defaulting on its debt obligations.
The cash flow levels indicate how much money the company has to run its daily operations. A company with positive cash flows is usually in an excellent position to handle its daily operations without problems.
Companies with positive and relatively high cash flows are always safer and are unlikely to struggle in a manner that can adversely affect their share prices.
Once you have identified a growth industry and found a strong stock within it, the next step is to look for an entry point.
The best way to find a good stock entry point is to look at the technical indicators. Moving averages, especially the 50-day, 100-day, and 200-day moving averages give a clear direction of where a stock is going in the short term.
While there is never a bad time to buy a good stock, the best times are when the stock has bounced off a strong support level or is in a breakout and has pushed through a key resistance level. This ensures that you ride the momentum for maximum returns.
Don’t Forget The Broader Market When Buying Stocks
When looking to buy stocks, it is best to look at the overall market direction as well. That’s because in most cases, stocks tend to move in the direction of the broader market. For instance, when the FTSE 100 is going up, most stocks are usually on an uptrend. The best times to invest are when the broader market is in a confirmed uptrend.
This was evident in the first 10-days of September. Due to a correction in the FTSE 100, most stocks dropped as well. This week the market has made a rebound, and most stocks are in the green.
However, this should not be construed to mean that one should not buys stocks when the key indices are trading sideways or are bearish.
In the long run, the broader market is always going up, save for a few fluctuations such as the 2008 recession. For instance, save for a few dips, the FTSE 100 has been on an uptrend since it was formed in 1984.
The whole idea is that, over and above, choosing good stocks and looking at the market direction, it is important to have a long-term view of the market. The people who have made the most wealth in the stock markets have done so not by always buying stocks at the right time but by holding onto good stocks for long periods.
Best UK Stocks To Buy Or Watch:
1. Quantum Blockchain
2. Flutter Entertainment
3. Deliveroo
4. Wise
5. Glencore
Now let’s take a deeper look at Quantum Blockchain, Flutter Entertainment, Deliveroo, Wise, and Glencore. The key denominator amongst these stocks is that they are all fundamentally strong.
Quantum Blockchain (QBT)
Bitcoin miner Quantum Blockchain is trading in a range intra-day. It has found strong support at £1.2550. While it has been bearish for the past two days of trading, volumes have been low. This is an indicator that a bullish reversal is highly probable in the short term.
If there is a reversal, the key level to watch will be the 200-day moving average resistance at £1.3208. If it clears through this resistance, then it could test prices above £2 in the short term.
The potential for a bullish reversal at some point in the future is evident in its price action on the month. Quantum dropped quite hard after it broke through the 200-day moving average support at £1.3575.
The selling momentum has since declined just above the 50-day moving average, and selling volumes have thinned out. This is an indicator that bears do not have much strength to push QBT through this support. In essence, the current price level is a good one in anticipation of a potential price reversal.
Besides the technical indicators, the broader industry factors and this stock’s internal fundamentals are in its favor.
Most companies that derive their revenues from Bitcoin mining have experienced a significant uptick in profits this year. That’s because the value of Bitcoin has shot up significantly in this period.
From lows of under $10k, the top crypto hit $64k in April this year. While it corrected shortly after, it has made a rebound, and companies that mine and hold BTC as an asset have had a windfall.
Quantum is also continually innovating, a factor that will add to its long-term value growth. As per its August update, the company stated that it has invested in research to increase the efficiency of its mining operations.
The company is aiming to do this by use of quantum computing and artificial intelligence. It has already brought together a team of experts from different fields and is also working with top University departments to facilitate the research.
The whole process seems to be going on so well that Quantum now expects to file a patent for its highly advanced Bitcoin miner soon.
Once this is achieved, Quantum’s revenues are likely to go up significantly. That’s because it will be able to mine more Bitcoins at much lower costs. With growing revenues, its intrinsic value will go up, and potentially, its stock price too.
This company is also in a market segment that is set for exponential growth going into the future. Blockchain technology is still in its infancy, and as adoption grows, so will the value of Bitcoin and other top cryptocurrencies.
Bitcoin also has the advantage of scarcity, which will be instrumental to its price action going into the future. The 2024 Bitcoin block halving will cut Bitcoin’s mining rewards to 3.125. If the price action after previous halvings is anything to go by, this event could push Bitcoin’s price to over $500k.
For a Bitcoin mining company that is working to increase its mining speeds, and cut on transaction costs, such a rally in the price of Bitcoin could give drive up QBT’s market value significantly.
On this basis, QBT is one UK share that makes sense to buy now or include in a watchlist to buy later.
Flutter Entertainment (FLTR)
Flutter Entertainment has been on a downtrend for the last 24-hours, continuing the downside momentum that started last week.
However, if you zoom out on the longer timeframes, one can see that this stock is on a rebound.
It has regained a significant portion of the value it lost in July. It pushed through the 200-day moving average in late August and has been trading above it for the past few weeks.
If it maintains above the 200-day moving average support at £14,226.25, it could test significantly higher price levels in short to medium term.
However, even if it remains volatile in the short term, its long-term trajectory is likely to be up. Several fundamental factors support this stock’s growth going forward.
One of them is the legalization of the US sports betting market, after a ban that lasted over a decade. Most states are catching up, which makes the US a growth market for companies in the online sports betting market.
For a company like Flutter that already has a strong presence in this market, its revenues could grow quite significantly going into the future.
Flutter’s revenues also benefit immensely from the majority stake that it bought in FanDuel back in 2018. While it didn’t seem like a big deal at the time, FanDuel has emerged as one of the best investments that Flutter has made in recent times.
Fantasy sports are on an exponential growth path in the US, and FanDuel has emerged as a market leader. The company expects to turn a profit in 2023, a factor that will play positively into Flutter’s intrinsic value in the long run.
In the short term, Flutter has a lot going for it. The sports season is back, both in Europe and in the US. In Europe and the UK, the football league is back, while in the US, the NFL is in progress. Thanks to vaccinations, fans are back in the stadiums, a factor that will add to the excitement around sports and sports betting.
Besides the positive business environment, Flutter has some solid fundamentals that could also boost this stock in the short term.
This company has quarterly revenue growth of 98.70%. This is an indicator that there is strong demand for its products, and this is good for the value growth of its share price.
The company also has strong cash flows. At the moment, it has operating cash flows of £1.11 billion and leveraged free cash flows of £824 million. This is an indicator that it has the resources to run its daily operations without struggle.
A good balance sheet, coupled with strong growth in revenues and an expanding market in the US, are good enough reasons to buy and hold this stock.
Deliveroo (ROO)
With more people working from home than ever before, Deliveroo stands in a good position for growth in the short term and in the long run.
After a selloff over the last 24-hours, Deliveroo has made a strong V-shaped recovery. It has pushed through the 200-day moving average resistance on the daily chart and is gaining.
However, besides these short-term price movements, Deliveroo’s fundamentals are pretty good. This company is one of the largest players in the UK home deliveries market. This means it is unique to grow with this market, and the potential is huge. That’s because the COVID-19 pandemic accelerated this market, and with a lot more people now fully adjusted to working from home, it will only get bigger.
Deliveroo is also quite aggressive in making moves that will entrench its position in the UK delivery market going into the future. For instance, it recently partnered with Boots for the deliveries of a select number of prescription medications. This will drive up its revenues, and the same will reflect in its stock price going into the future.
The company’s books look pretty good, too, and paint the picture of a company that has what it takes to give investors superior returns going into the future.
For starters, the company has quarterly revenue growth of 81.18%. This is an indicator of strong uptake of its product offering and that demand is growing. Since revenues are one of the key indicators of the health of a company, then it’s safe to say that ROO is good.
Its balance sheet is pretty strong too, for a growth company. It has a current ratio of 3.50, which means its current assets are able to cater to its current liabilities three times over.
Deliveroo’s cash flow statement looks pretty good too. The most interesting aspect of this company’s cash flow statements is that they are positive and have no leveraged cash flows.
One thing that can be deduced from this company’s balance sheet is that it would be safe even if interest rates were to go up in the short term. At the same time, ROO is in a position to borrow at favourable interest rates if they need to expand its operations.
These factors, coupled with its expanding market share make it’s a strong stock to buy now and hold for the long haul.
Wise (WISE)
Wise has been on an uptrend for the past week. It is currently trading in a bullish channel above the 100-day moving average. If it holds above this support and manages to push through the 50-day moving average at £1,026.65, then it could rally in the short term.
Besides the technicals, this stock has pretty good fundamentals backing it up. For a company that is only a few years old, Wise has become one of the biggest global cross-border payments market players.
Its biggest advantage is transparency. When doing cross-border payments, banks have high fees and have a lot of hidden fees. Wise changed this by always letting customers know upfront how much they will be paying in fees.
This company also uses fixed interest rates for a period of 48-hours during transactions. The idea is to help customers predict how much they are sending and how much their recipient will get.
The approach that wise has taken seems to be working if its growth since launch is anything to go by. Given that its share of the cross-border payments market is on a growth trajectory, chances are that Wise’s revenues, and by extension, its value will go up in the long run too.
Wise’s books look pretty good too. The company has a gross profit margin of 7%, and an operating margin of 12%. Considering that it is operating in a highly competitive market where it has to compete with banks, this is an indicator that its product offering is strong.
Its balance sheet is quite strong too. The company has a current ratio of 1.07, meaning it has enough resources to cover its current liabilities. Its cash flows are also net positive, standing at £2.07 billion. This means it has the resources to go about its business, without disruptions comfortably.
A combination of a strong value proposition, a growth market, and strong books make this stock worthy of buying now or putting in a stock watchlist for the future.
Glencore (GLEN)
Basic materials company Glencore has been on an uptrend year-to-date. In the last 5-days, the momentum has been bullish, albeit with a minor correction over the last 24-hours.
Nonetheless, it is holding steadily above the 200-day moving average at £338.44. This is an indicator that buying momentum is very strong for this stock at the moment.
The fundamentals for Glencore are pretty good too. One of its biggest fundamental strengths is its involvement in cobalt mining, one of the materials needed to manufacture electric vehicle batteries.
With consumer demand and government policy pushing the demand for electric vehicles globally, cobalt prices are likely to stay high for years. This translates to a potential for revenue growth for Glencore.
Glencore is also positioning itself more directly in the EV battery market. Recently, it announced the purchase of a stake in Britishvolt, a UK company that is building a giga-factory for making EV batteries.
The deal also included a long-term agreement for the supply of cobalt to this giga-factory. This is a big deal, and pretty much anchors Glencore’s future revenues on a sustainable platform.
Glencore’s books paint a picture of stability too. The company has a current ratio of 1.08 and is also net cash flows positive. This means it can borrow comfortably if it needs to. It is also in a position to carry out its daily operations without interruptions caused by liquidity issues.
It’s a UK stock worth buying or putting on a watchlist going into the future.
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