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3 UK Stocks to Buy Now

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The end of England’s FIFA World Cup dreams was probably its lowest point in recent times. Its exit from the from the world’s biggest sporting event may have also hurt the economy to some extent. This is because the World Cup had provided a boost to retail and leisure spending. Sales of sporting goods and merchandise, TVs and spending on food have all been hit. But the bigger picture is much brighter. Recent data indicates that England, and the UK in general, is making a steady and balanced economic recovery.

Balanced Expansion

The final estimate for first quarter GDP reveals that the economy expanded at 0.8% during the period. This is lower than consensus expectations of a 0.9% increase. However, official data indicates that growth has been far more balanced than earlier estimated.

According to the latest numbers, manufacturing expanded at 1.5% in the first quarter. This is higher than the earlier estimate of 1.4%. Revisions for construction activity were more significant. The sector increased by 1.5%, compared with the earlier estimate of 0.6%.

Business Investment and Services

Business investment also nearly doubled, increasing by 5%, compared with the earlier estimate of 2.7%. This means that productivity could increase significantly in the future. It also means that the economy’s dependence on consumption expenditures had decreased.

Services make up nearly 75% of the UK’s economic growth. The sector grew by 0.8% during the first quarter, compared with the earlier estimate of 0.9%. However it was still the biggest catalyst for growth during the quarter. The sector had also expanded 3.1% through April.

Current Account Deficit

The reduction in the current account deficit is another positive for the UK. This figure has declined to £18.5 billion during the first quarter from £23.5 billion in the previous quarter. A senior economist at Capital Economics said though the deficit was still significantly large, there was reason to believe that it would continue to decline over time.

This is because poor returns from foreign investment may be a temporary phenomenon. Investment income has declined primarily because of low returns from overseas FDI. A large portion of these funds have been invested in the Euro-zone. With a recovery taking place in this region, earnings from FDI should also increase, leading to a reduction in the deficit.

Our Choices

The UK seems to be making a steady recovery which is set to pick up pace in the future. Below we present three stocks from the United Kingdom which possess the potential to grow appreciably, each of which also has a good Zacks Rank.

The Royal Bank of Scotland Group plc (RBS - Free Report) is the holding company of one of the world's largest banking and financial services groups. Headquartered in Edinburgh, the group operates in the UK, US and internationally through its two principal subsidiaries, the Royal Bank and NatWest.

RBS has a large and diversified customer base and provides a wide range of products and services to personal, commercial and large corporate and institutional customers.

The Royal Bank of Scotland Group holds a Zacks Rank #1 (Strong Buy) and has expected earnings growth of 147.70%. The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 18.36.

BT Group plc (BT - Free Report) is one of the leading providers of communications services and solutions. Its principal activities include the provision of networked IT services telecommunications services; broadband and internet products and services and converged fixed/mobile products and services.

The company is a communications services provider in the UK, and offers products and services to retail customers, small and medium-sized enterprises and the public sector.

Currently the company holds a Zacks Rank #2 (Buy) and has expected earnings growth of 15.50%. It has a P/E (F1) of 13.18.

Reed Elsevier plc is a company which provides professional information solutions. The company operates through five business segments. These provide a varied number of offerings such as risk analytics, technical and medical information solutions, and legal, tax and regulatory solutions.

The company also provides marketing solutions and organizes conferences and trade exhibitions. Reed Elsevier purchased UK-based data services company Wunelli in May 2014.

Apart from a Zacks Rank #2 (Buy), Reed Elsevier has expected earnings growth of 14.80%. It has a P/E (F1) of 16.92.

A well-balanced recovery on all fronts indicates that companies based in the UK are good investment propositions. This is why these stocks would make good additions to your portfolio.

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