Top 7 UK Shares To Buy In February

These UK Shares hold lots of potential in February 2022

Last Updated January 27th 2022
15 Min Read

February is here, and it’s time to look for stocks that hold potential not just for the month but for Q1 of 2022. 

The UK stocks below are very attractive at current prices. Read more to find out why. 

Top UK Shares To Buy In February 2022:

 

1. JD Sports

A high-end online sports and fashion retailer

JD Sports (JD) easily stands out in the list of top UK stocks to buy this February. Being a holiday season and the football season in full gear, shopping for sports apparel and other luxury items will likely go up this month. 

As such, JD Sports could record an increase in sales throughout the month, and the same will reflect in its price action in the short to medium term. 

While other industry players will compete for February sales with JD Sports, it has the advantage of market dominance. 

JD Sports is so dominant in the sports apparel and luxury items market that the UK competition authority is questioning its purchase of Footasylum back in 2019

This means JD stands to get the lion’s share of high street fashion sales all through the holiday season.

Aside from its potentially high sales this holiday season, JD’s books are solid. For instance, JD’s quarterly revenue growth stands at 52.70%. That’s a testament to the underlying strength of its value proposition.

JD’s balance sheet points to a healthy company too. One of the most important metrics of a company’s health is its ability to pay debts. On this front, JD is pretty good, with a current ratio of 1.38. 

Basically, this means JD has more than enough resources to cater to all its short-term debt obligations. By extension, it means JD has the room to borrow more if the right investment opportunities arise. 

Another important measure of a company’s health is its cash flows. Cash flows determine a company’s ability to comfortably run its daily operations without running out of liquidity. 

Due to its high-margin products, JD has maintained a sustainably high level of cash flows. This guarantees that its operations are unlikely to be interrupted at any time, especially now that fashion retail companies are capitalizing on holiday season sales. 

The charts too confirm that JD Sports is a pretty hot UK share to buy today. From a look at the monthly chart, it is clear that JD is in a bullish continuation pattern. 

JD has been bullish for four months straight. While the stock has dipped slightly in December, buying volumes are high. 

If buying volumes remain high and JD clears through November’s high of GBP 235.2, it could easily test GBP 250 or more within the month.

For such potential, JD is likely to remain a top UK stock not just in February but all through Q1 of 2022. 

Read Also: What Are The Best UK Shares To Buy For 2022? 10 You Must Know!

2. Deliveroo

An online grocery delivery company 

Deliveroo (ROO) comes a close second on hot UK stocks to buy this February. Deliveroo’s potential has a lot to do with the fears that have been created by the emergence of a new coronavirus strain. 

With new travel restrictions coming up, and people being urged to be more careful, many more people could opt to spend their Christmas period at home. The result will be an increase in the demand for online food delivery services like ROO all through the holiday season. 

Aside from the potential increase in demand for online food delivery services in the UK, Deliveroo is also expanding into other lucrative markets.

A few weeks ago, Deliveroo announced that it was expanding into the French market. The expansion is through a partnership with Picard Groupe SAS for express deliveries all across France. Deliveroo has been quite aggressive in its French expansion, and the deal with Picard is the third in France. 

Deliveroo is also continually innovating to push upmarket share and revenues. One of its latest innovative drives is Hop, a rapid grocery delivery service. Hop will rely on dark stores and push Deliveroo’s drive into new, high-value markets such as Italy and Hong Kong in Asia. 

Hop is still in the trial phase, but Deliveroo says that the results are encouraging so far. Thanks to the trial's success, Deliveroo intends to push up the number of partnerships and expand on the model. According to the CEO, Will Shu, the Hop innovation has so far cut delivery times to just 11 minutes

A combination of the holiday season, expansion into new markets, and new innovative ways to serve customers better make ROO a pretty hot UK stock to buy this February. 

If the GBP 150 support holds for the next few weeks, ROO could go into a full-blown bullish reversal, with a potentially impressive ROI in the short to medium term. 

3. Flutter Entertainment

An online gambling company

Flutter Entertainment (FLTR) may have tumbled recently, but it easily stands out as a top UK stock to buy today. 

For starters, with COVID-19 still spreading fear and a new variant now in circulation, more people are likely to enjoy the back-to-back EPL games of Christmas from home. This spells good tidings for online gambling companies, and Flutter stands to reap big. 

Flutter’s earnings took a hit recently after a streak of favourable results for gamblers, but that’s just a short-term fluke. The chances of games turning out consistently in favour of gamblers are pretty low.

Besides the likely increase of sports gambling all through the holiday in the UK, Flutter faces equally good fortunes in the US A while back, Flutter bought a controlling stake in US fantasy sports company FanDuel. 

FanDuel has since grown to become one of the largest fantasy sports players in the US With the holiday season coming up and news of a new variant of COVID-19 spreading, FanDuel could see an upsurge of users all through February and push up Flutter’s revenues.

Aside from a potentially favourable holiday season, Flutter has been making investments that are likely to drive up revenues in the short to medium term. One of the big investments that Flutter has made recently is the purchase of Tombola, an online Bingo platform for £402 million

Based on Tombola’s core data, it is a positive addition to Flutter’s bottom line. Tombola has an average of 400k users a month, and in the last financial year, it recorded earnings of £38.2 million from revenues of £164 million.

While the Tombola deal is expected to be finalized in Q1 of 2022, it is expected to shore up the intrinsic value of Flutter. This could see investors bid up the price of Flutter all through February and into Q1 of 2022.

Flutter’s books also paint the picture of a company that is standing on solid ground. Flutter’s quarterly revenue growth numbers stand at 98.70%. This is an indicator that the uptake of its products is strong. Flutter is in a strong cash flow position, too, a factor that gives it the ability to handle all its gambling operations with ease. 

Based on technical indicators, Flutter’s monthly chart confirms its potential as a top UK share to buy this February. Flutter has been in a selloff for the past two months. Temporary factors largely triggered this, though, namely news of games being in favour of gamblers and the Omicron COVID-19 variant that has shaken the entire market. 

However, both of these issues have already been factored into the price, hence the drop in selling volumes over the last few days. Going by the mantra of buy low and sell high, Flutter is in a buy zone, especially when you factor in the recent purchase of Tombola. 

A reversal from its current price of GBP 10,550 could see Flutter give investors an impressive ROI, not just this month but for many months to come. 

4. Tesco

One of the UK’s largest retailers 

With all the holiday shopping happening at the moment, Tesco (TSCO) comes off an obvious stock pick this February. 

The food retailer and wholesaler with a strong online presence is likely to boost this holiday season, now that online shopping has become the norm. 

Besides, fears of the recently discovered variant of the Coronavirus could help boost online sales for companies like Tesco. That’s because there are new shoppers who traditionally don’t do online shopping but are being driven into it by prevailing circumstances. 

Tesco brand presence is growing too. This is evident in a recent report on its market share. According to the report by NielsenIQ, Tesco was the only one of the big grocery retailers that recorded an increase in sales over a period of 12-weeks up to the last week of November 2021. 

The report noted that thanks to this increase in sales, Tesco’s dominance also shot up, just weeks ahead of the Christmas season. In essence, Tesco is entering the festive season, often characterized by an increase in food and grocery shopping, from a position of strength. 

Tesco has also been making moves that could see it preserve its dominance in the UK food and grocery market. Back in October, Tesco entered into a partnership with Gorillas. Through the deal, Tesco customers can receive their deliveries in under 10-minutes. 

At the time, Tesco CEO for the UK and Ireland, Jason Tarry said that Tesco aims to be the most convenient choice for customers, by helping them shop at any time, and from anywhere. 

Considering the strong competition that new online grocery stores are putting on traditional retailers, partnering with Gorillas is a strong competitive move by Tesco. It’s a move that guarantees Tesco investors value growth, not just in February, but also going into 2022 and beyond. 

Tesco’s books are strong too, and paint the picture of a company that is standing on a solid foundation. One of the most important fundamental metrics in retail is cash flows. 

Without proper cash flows management, a retailer’s operations can easily ground to a halt. On this front, Tesco is pretty well covered, with positive operating cash flows of £1.1 billion. 

Aside from the positive confluence of a strong balance sheet, growing sales, and the holiday season, Tesco’s charts paint the picture of a stock that is in a buy zone. 

Tesco has been gaining upside momentum for the last 6-months and was pretty resilient in the market-wide selloff of late November. Since it pushed through August’s high of GBP 267 in October, upside momentum has accelerated. 

With holiday sales set to boost revenues, February could see even better performance for TSCO shares. 

A push through GBP 300 is possible within the month. In fact, based on its charts at the moment, it is not just a top UK share to buy, but a pretty safe one to hold all through February as well. 

Check Out: 3 No-Brainer UK Stocks To Buy Right Now

5. Electrocomponents

A globally-renowned electronics components firm

Next on the list of top UK shares to buy in February is Electrocomponents (ECM). Like the other stocks in this list, Electrocomponents has the fundamentals to see it rally, but it also has the added advantage of positive sentiment. 

The hype around ECM has a lot to do with its entry into the FTSE 100. Thanks to its recent price rally, ECM has managed to replace two heavyweight stocks from the FTSE 100. The stocks it has replaced are Darktrace and Johnson Matthey. 

Due to the excitement around the entry of ECM into the FTSE 100, buying volumes are high, and its price is currently on the rise. This momentum could see ECM as one of the top performers in the FTSE 100.  

In terms of fundamentals, Electrocomponents is a pretty solid stock. For starters, the company operates in a high-growth market, one that is projected to grow at an accelerated rate in the coming years. 

According to Electrocomponents’s management projections, the company’s potential market is worth about $400 billion. That’s a huge market, and Electrocomponents believes growth is outpacing GDP.

Electrocomponents management also believes that it has a fighting chance in its core market because there is no single dominant player. Per the management, the top 50 companies only account for 30% of the total market. On its part, Electrocomponents accounts for about 1% of the total global market, and 5% of the domestic (UK) market. 

Despite its relatively small share of the market, Electrocomponents has the edge over many other industry players. That’s because it has a wider distribution network than a majority of the industry players. It has a network of 12 distribution centers that serve customers across 80 countries.

Another fundamental aspect to Electrocomponents that makes it a worthy UK share to buy, is competent and forward-thinking top management. Back in 2008, the company was in shambles following the global financial crisis. However, under the strong leadership of CEO Lindsley, the company has bounced back, and the stock has grown by more than 300% since 2015. Lindsley has turned the company around with a strategic focus on empowering customers to buy and maintain their products.

With such management in place, Electrocomponents will likely remain a strong performer not just this February but through 2022 and beyond.

Electrocomponents price action also points to a stock that has the potential to make big moves in the short to medium term. 

ECM has been on a consistent bull run since May. This month, bears have tried to take control of ECM over the last days of trading, but volumes have been low. This is an indicator that the momentum that started 6-months ago could continue this month. 

The key level to watch at the moment is November’s high of GBP 1278. If ECM pushes through this price level, it could reach GBP 1400 over the next months. 

6. Darktrace

A cyber-tech company

Darktrace (DARK) may have lost its position in the FTSE 100, but that doesn’t mean that its fundamentals are weaker. Stocks in the FTSE 100 are evaluated every 3-months, and due to market fluctuations, getting in and out of the FTSE 100 is quite normal.  

One of the fundamental factors likely to push Darktrace all through February is the growing awareness about the need for internet security.

Since 2020, the number of major organizations, including government institutions, which have been hacked has shot up significantly. The most recent major company to get attacked is Tesco, an attack that left its website off for a while. 

With a massive increase in such attacks, the demand for the services of companies like Darktrace will only grow. The growing demand for the services of Darktrace is evident in the company’s recent improvement in revenues and profits.  

For context on how important DarkTrace’s services are, the company recently released data showing that its experts had found a 30% surge in ransomware attacks worldwide between 2018 and 2020. DarkTrace also found that this surge was largely confined to the holiday season. 

Darktrace has the tech to deal with this problem, which is part of its core fundamental value. Darktrace leverages the capabilities of self-learning AI to come up with tailor-made solutions for every organization that it helps secure. 

With Darktrace’s ability to deal with the emerging cybersecurity threats thanks to the power of AI, the company’s revenues are likely to grow long term, and so will its value. This month specifically, the report showing that cybersecurity threats rise during the holiday season could also act as a huge boost to adoption, and by extension revenues all through the holiday season. 

Darktrace already got a boost after a recent report that it had been selected as one of the companies to offer cybersecurity assistance during the world cup in Qatar

With these fundamentals in its favour, DARK is clearly in the oversold territory after the recent selloff. If the GBP 350 level holds, the chances of a bounce-back are quite high. The risk-reward potential is high at DARK’s current price level, making it a top UK share to pick up this February.

7. Diageo

A global alcoholic beverages company 

The holiday season is here, which means strong sales for alcoholic beverage maker Diageo (DGE). Even with the Omicron COVID-19 variant threatening the markets, Diageo is likely to experience a boost in revenues as more people spend time at home with family and friends.

Diageo already issued positive revenue guidance, not just for the festive season but for the next 3-years. This shows that as the UK, and world economy opens up more, Diageo could see an increase in sales, and by extension, its intrinsic value. 

The best part is that most of the brands it sells are among the most known, not just in the UK, but globally. They include brands like Johnnie Walker, Bailey’s, and of course Guinness. 

Diageo’s monthly chart is a positive indicator of why this stock is a hot pick in February. For starters, Diageo has been trending up all through 2021, and that momentum does not seem to be easing up. This has a lot to do with the lockdowns that started in 2020, forcing people to stock up on alcoholic beverages in anticipation of a prolonged stay indoors. 

With holiday season alcohol sales set to go up, Diageo could soon be trading at GBP 4000 or more, easily making it one of the top UK stocks to buy in February and potentially all through 2022. 

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