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Sometimes the market offers up what seem like no-brainer buys to me. Here’s three UK shares to buy that I think fit into that category right now.
A former penny stock
hVIVO (LSE HVO) recently moved from the penny stock realm to the world of small-caps. This was after the shares rose 41% in January. However, that still leaves them down 57% since reaching an all-time high of 38p back in April 2021.
The company is a world leader in testing infectious and respiratory disease vaccines and therapeutics using human challenge trials. These clinical trials involve exposing healthy volunteers to the pathogen a vaccine is being trialed to protect against. The firm runs these challenge studies at its specialist facility in London.
So why the recent turnaround in the stock? Well, hVIVO is signing larger contracts with global biopharma clients, resulting in it recently raising its guidance. Full-year revenue for 2022 was £50.6m, a 30% year-on-year increase.
Importantly, this is profitable growth, with the company expecting full-year EBITDA margins of at least 17%. Plus, the group’s order book has swelled to record levels, rising 60% year on year to £76m. This represents a six-fold increase since 2020.
With its shares at 16p and a market cap of £110m, I think hVIVO has the potential to march higher from here. Despite the inherent riskiness of human challenge trials, I’ve been loading up on the stock.
Rising defence budgets
The shocking reality of war again in Europe sent many defence stocks soaring last year. Indeed, BAE Systems rocketed 54% in 2022, making it the best-performing stock across the whole FTSE 100. However, shares in electronic warfare specialist Chemring Group (LSE: CHG) are down 18% in six months.
As a reminder, the company develops advanced technology solutions, including products used to deceive radar, sonar, and other detection systems. Military aircraft can use its technology to fool ground-to-air missiles. It also sells products to detect biological and chemical weapons.
Needless to say, this stuff has been in high demand lately. The group’s full-year revenue to 31 October increased 13% year on year to £442.8m. Its underlying pre-tax profit rose 12% to £62.5m. Noticeably though, Chemring’s order book has expanded significantly, rising 30% year on year to £650.9m.
One risk here is customer concentration, as around 80% of the company’s sales are from the UK and US. Any massive cuts to military spending in either country could hurt sales. Yet I doubt that’ll happen. Global military spending is forecast to rise by 8.6% this year, according to data provider Janes.
So the stock looks like a no-brainer buy to me. That’s why I recently added it to my own portfolio.
My final share to buy is Warehouse REIT, the real estate investment trust that focuses on ‘last mile’ warehouses. The stock plummeted 41% last year, with investors fearing that a recession and higher interest rates could threaten rental income and the value of its property portfolio. These risks haven’t gone away.
However, new lettings have increased its portfolio occupancy rate to 93.3%, which looks solid to me. The stock has a forward dividend yield of 6.2%.