5 Best UK Shares to Buy in October 2021

While the FTSE 100 is up almost 10% for the year and is close to the pre-pandemic levels, UK shares have underperformed the US as well as several other markets this year.

Meanwhile, the UK is witnessing another surge in COVID-19 cases which might put further pressure on the markets. However, there are still some UK shares that look like a good buy in October 2021.

1. GlaxoSmithKline Plc. (LON: GSK)

GlaxoSmithKline Plc. shares have been a perennial underperformer. The shares are up only about 4% in 2021 and are underperforming the FTSE 100. The hares have lost 12.5% over the last five years. However, it pays a fat dividend and at current prices, the yield is 5.6%. Meanwhile, the company has been taking several measures to turn around the business under the leadership of its CEO Dame Emma Walmsley. However, while Walmsley has spent half a decade at the company, the shares have continued to sag.

The company’s COVID-19 vaccine efforts were a disappointment. However, its malaria vaccine was recently approved by the WHO.

GSK is set to split

GSK is set to split next year and its consumer healthcare business would split away from the vaccine and pharma business. The move was made after activist investor Elliott Management, which is run by Paul Singer, took a stake in the company. The hedge fund has previously been instrumental in the split of Alcoa, the largest US-based aluminium company. After Elliott invested in the company, Alcoa split into two separate companies, Alcoa and Arconic. While the former retained the legacy aluminium production business, the latter housed the downstream fabrication business.

GSK is a good UK share with a high dividend yield

Meanwhile, Wall Street analysts don’t look too bullish on GlaxoSmithKline shares and half of them rate it as a hold. The median target price implies an upside of only about 6%. That said, the management expects the turnaround soon. The expected turnaround coupled with the high dividend yield makes GSK a UK share worth watching. The valuations also look reasonable and it trades at an NTM (next-12 months) PE of 13.3x.

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2. Argo Blockchain (LSE: ARB)

UK-based bitcoin mining company Argo Blockchain looks like another UK share worth buying. The company was recently listed on the US markets also. Meanwhile, the price action of Argo Blockchain seems at odds with other bitcoin mining shares, as well as cryptocurrencies. The shares have largely been trading sideways over the last month even as share prices of other bitcoin miners have surged. The shares trade at less than half of their peaks and look a good buy after the crash.

ARB is a good UK share to buy in the bitcoin mining space

ARB looks like a good UK share to buy and play the bitcoin mining space. Bitcoin prices recently surged to a new record high after the launch of the bitcoin mining ETF in the US. The adoption of cryptocurrencies has been rising which makes bitcoin miners like Argo Blockchain a good UK share to buy in October.

Wall Street analysts are bullish on ARB shares and some initiated coverage with a buy rating post the US listing.

Jefferies, which has a street high target price of $30 on the US-listed shares said “BTC mining should remain a high margin business, and ARBK’s margin should improve as they build out in Texas, where power rates (largest OpEx) are half the rate of the in-place portfolio.”

From a valuation perspective, Argo Blockchain shares seem attractive as compared to other bitcoin miners. If you are looking for a good UK share to buy, Argo Blockchain should definitely be on your watchlist.

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3. Antofagasta (NYSE: ANTO)

The UK market is home to several miners including copper miners. Antofagasta looks a good UK share to buy in October considering the positive outlook for copper prices. Copper is one commodity where the market opinion is largely bullish. Copper demand is expected to rise in the long term as the global economy pivots towards a low carbon future. Copper intensity is higher in both electric cars as well as renewable energy generation which bodes well for long term copper demand.

ANTO is a good UK share to buy and play copper industry

If you want to get exposure to copper, you can do it by directly trading in copper. An alternate approach would be to invest in shares of copper mining companies. Pure play copper mining companies like ANTO look a good way to invest in copper. Given the relative scarcity of pure-play copper mining companies, companies like ANTO can attract a valuation premium. Also, big miners might also look at acquiring pure-play copper miners in a bid to shore up their copper portfolio.

ANTO has a dividend yield of 3.6% which makes it an attractive high dividend UK share to buy. The valuations look reasonable and the shares trade at an NTM EV (enterprise value)-to-EBITDA multiple of around 4.9x.

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4. Rolls-Royce (LSE: RR)

Rolls-Royce looks another good UK share to buy and play the reopening story. The shares have outperformed the markets in 2021 and should continue their good run amid the gradual recovery in the aviation market. The company has also been taking measures to bring down in debt and has agreed to sell ITP Aero to Bain for around £1.5 billion. The move would help the company improve its balance sheet.

Last month, Rolls-Royce signed a $2.6 billion engine contract with the US Air Force. The company is also looking to partner with the Indian Navy. Meanwhile, while the company’s defence business has been doing well, the civil aviation business has sagged. However, as the airline travel reverts back gradually towards the pre-pandemic levels, RR would also see a rebound in earnings.

RR is an iconic UK share

RR is an iconic UK share even as it is currently facing several challenges. However, with an NTM EV-to-EBITDA multiple of 10.4x, RR looks a reasonably valued UK share to buy. The company is a good way to play the expected rebound in the aviation industry.

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5. BP Plc. (LON: BP)

Energy prices have been incredibly strong in 2021 amid the strong global demand. Many are now projecting crude oil prices to $100 per barrel, a possibility that almost all of the analysts would have scoffed at a few months back. Within the energy industry, BP looks like a good UK share to buy. In the short term, the company would benefit from higher energy prices. However, over the long term, the company’s pivot towards renewable energy would add shareholder value.

BP is a good UK share to buy amid the pivot to renewables

BP CEO Bernard Looney has been trying to transform the company from a fossil fuel giant to a renewable energy leader. He has announced plans to sell $25 billion worth of fossil fuel assets by 2025. BP has already sold $15 billion worth of assets under Looney. The company also intends to cut its crude oil production by 40%. While almost all the energy giants are taking of lowering their carbon footprint, BP became the first company to commit to a quantitative production cut.

Overall, BP looks like a good UK share to buy in October. At current share prices, the energy giant pays a dividend yield of 4.4% which looks quite attractive.

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