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Looking for dip-buying opportunities following recent stock market weakness? Here are two top UK stocks and funds I think merit close attention right now.
The fund
Amid signs that US ‘exceptionalism’ could be waning, some analysts believe investors may start to switch their attention to other countries’ equity markets. If data from Hargreaves Lansdown is to be believed, this trend could already have started in earnest.
The investment platform has said that purchases of UK shares have outweighed those involving US shares by a ratio of 3:1 in recent days. As fears over the economic and political landscape Stateside grow, this is a phenomenon I think could pick up substantially.
In this climate, researching a UK stocks fund like the iShares MSCI UK IMI Leaders ETF (LSE:UKEL) could be a good idea. This exchange-traded fund (ETF) tracks the performance of a basket of British stocks, the majority of which are the big beasts of the FTSE 100 and mid-cap growth shares of the FTSE 250.
Some of the largest holdings here are Unilever, National Grid, Lloyds and Reckitt Benckiser.
In total, the fund has holdings in 144 companies, allowing investors to effectively spread risk. What’s more, it’s focused on companies with strong environmental, social and governance (ESG) characteristics. This leaves it well placed to harness rising investor demand for ethical shares.
Beware, however, that returns could disappoint if market sentiment towards UK-based assets sinks again.
The stock
Another interesting piece of trading data from Hargreaves Lansdown caught my eye recently. This showed net purchases of gold ETFs up 157% last week compared to the week before.
This is no surprise given the yellow metal’s role as a safe-haven asset in tough times. Many analysts expect gold prices to take out last week’s record high near $3,171 per ounce as macroeconomic and geopolitical uncertainty swells.
I myself purchased a fund tracking the performance of a basket of gold mining stocks to capitalise on the metal’s continued bull run. And I believe Hochschild Mining (LSE:HOC) could be a great individual stock to consider buying in the current climate.
Investing in specific mining stocks like this can be riskier than buying a fund that holds many. Project exploration, mine development and metal production can be rife with setbacks that can smack earnings and share prices. Investing across several companies reduces this risk on overall returns.
That said, I believe this risk is more than baked in to the cheapness of Hochschild’s share price. City analysts think earnings will soar 103% in 2025, leaving the company trading on a forward price-to-earnings (P/E) ratio of 8.7 times.
A sub-1 price-to-earnings growth (PEG) ratio of just 0.1 also underlines the company’s cheapness.
I also like the fact that Hochschild produces silver alongside gold from its assets across the Americas. Both these metals rise sharply in demand during uncertain times. However, silver’s wide use in industrial applications mean it can also rise sharply in price when economic conditions improve.
