It’s clear the global economy faces significant challenges following the mass Covid-19 breakout of early 2020. But is this a reason for UK share investors to put their chequebook away? I don’t think so.
As a long-term investor, I haven’t stopped investing in my Stocks and Shares ISA. I buy UK shares with a view to holding them for a minimum of 10 years. Over this timescale the impact of economic downturns on their performance is greatly reduced. UK share investors tend to make an average annual return of 8% to 10%, data shows.
A top-class UK share
Besides, there are plenty of quality UK shares that should deliver excellent profits growth, irrespective of the economic downturn. For example, grabbing a slice of the e-commerce sector is a good idea as online shopping activity booms. I’ve bolstered my own exposure during the summer by investing in logistics specialists Tritax Big Box REIT and Clipper Logistics. And I reckon buying e-retailer The Hut Group (LSE: THG) is another good idea.
While broader retail conditions remain difficult, online operators seem to be pulling away. This UK share saw revenues growth accelerate in the third quarter, prompting the company to lift its full-year forecasts.
But the strong performance of its own retail operations — which cover a broad range of segments from clothing to cosmetics, nutrition to experiences — is not the only reason why THG is a white-hot play on the e-commerce phenomenon.
The company also licences its THG Ingenuity software platform to help retailers and fast-moving consumer goods (FMCG) manufacturers reach online shoppers cheaply and easily. It’s hoped THG will be able to replicate the success of Ocado. This FTSE 100 company also provides its tech to other retailers via a Software as a Service (SaaS) model.
According to THG: “Ingenuity’s rapidly growing list of partners includes Nestle, PZ Cussons, Homebase, Group L’Occitaine, Clorox and Johnson & Johnson, all of whom who are signing long-term SaaS contracts to deliver digital transformation on a global scale.”
The rush for its tech propelled revenues from Ingenuity by more that 170% year-on-year during the last quarter. And the UK share has kept the contract wins coming by inking a five-year partnership with Hotel Chocolat last month. The deal is intended to help the chocolatier expand into the high-growth US marketplace.
THG’s share price rocketed 25% on the day it made its London Stock Exchange debut around six weeks ago. And it’s continued to surge from its IPO offer price of 500p per share, last dealing at 715p. I fully expect this UK share to continue swelling in price as e-commerce goes from strength to strength. I think this UK business could emerge as one of the brightest growth stocks of the 2020s.
Royston Wild owns shares of Clipper Logistics and Tritax Big Box REIT. The Motley Fool UK has recommended Clipper Logistics, Hotel Chocolat, Johnson & Johnson, PZ Cussons, and Tritax Big Box REIT. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.