What are the best UK shares to buy in October?

October 9, 2021 0 Comments

Historically, returns from UK shares in October have been kind of mixed. The month has a special place in the finance world because of something called the October effect. This is the annually recurring psychological anticipation of financial decline and potential stock market crashes. And it’s not completely without reason. Looking back, the bank panic of 1907, the stock market crash of 1929, and Black Monday of 1987 all occurred in October. 

Despite this unfavourable track record, the fourth quarter of most years often produce stellar results. As such, October could be one of the best months of the year to buy stocks. Even more so this year, as many UK share indices have fallen over recent weeks. So with that in mind, here are two UK shares I’m considering adding to my portfolio this month.

The top UK banking shares

The Lloyds Banking Group (LSE:LLOY)share price is up over 27% year-to-date. And looking at its 12-month performance, the returns are an even more substantial 66%. 

It’s been a good year for the bank. The company achieved better than expected revenues as well as profits in its latest earnings reports. And at today’s share price of 46.8p, the stock is trading at a low P/E ratio of just over 7.1. To me, this looks quite cheap. And it seems JP Morgan agrees as it released a report saying, “Lloyds retains a unique scale advantage over most other UK retail banks due to its leading market share”.

Amidst the progress Lloyds bank has made recently, it still faces huge competition from digital banks and traditional banks. With the rise of digital banks, I think Lloyds’ chances of gaining new customers could be limited save they innovate quickly. In any case, Lloyds bank is a buy for me this October.

Rolls-Royce – a top UK share to buy in October.

I’ve previously explored Rolls-Royce(LSE:RR). And the last time I looked at the business, I decided to keep it on my watchlist. But looking at its more recent performance, I think it might be time for me to buy.

The Rolls-Royce share price is up more than 27% over the past month. That’s about 26% high year-to-date and 160% over the past year. The company has managed to secure a new 30 year deal with the US Air Force. And the aerospace sector, in general, seems to be steadily recovering from the effects of the pandemic.

With the current pace of vaccinations and many economies reopening, Rolls-Royce will likely see the demand for its engines and services begin to rise again. This, in my view, is what makes Rolls-Royce one of the best UK shares to buy in October. 

But it still has its fair share of risks. The effects of the Covid-19 virus is still very much around. As such it could take some time before the company is able to make a complete recovery.

Concluding thoughts

Though the stock market has a history of having mixed results in October, the fourth quarter has most times been the best quarter of the year. And with both these businesses looking primed for future growth, now might be the time to buy for my portfolio

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Prosper Ambaka does not own shares in any of the companies mentioned. The Money Cog has no position in any of the companies mentioned. Views expressed on the companies and assets mentioned in this article are those of the writer and therefore may differ from the opinions of analysts in The Money Cog Premium services.

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