If I had to select the best shares to buy now to invest a lump sum of £5,000, I would focus on companies in the resource and engineering sectors.
I think these sectors are set to benefit most from the global economic recovery over the next few years. While geopolitical tensions may lead to some uncertainty over the next couple of months, I think the long-term outlook for these industries is exciting.
Indeed, some companies like Rio Tinto (LSE: RIO) are currently benefiting from what I can only call a Goldilocks environment.
Best shares to buy now for growth and income
The price of the company’s main product, iron ore, is trading at a multi-year high. This is only part of the equation. For the past decade, the organisation has been trying to reduce its operating costs and pay down debt. The combination of these initiatives as well as the higher iron ore price, has helped the firm generate record profits.
I believe these trends will persist for some time. By investing in automation and other efficiency initiatives, the company can keep costs down. The iron ore price is unlikely to remain high forever, but I think the cost of this crucial commodity will remain elevated as the world tries to rebuild from the pandemic.
Rio is one company I would buy for my £5,000 portfolio. I think the engineering group Weir (LSE: WEIR) also deserves a place on my list of the best shares to buy now.
This engineering enterprise supplies critical components to the mining, oil, and gas sectors. Due to the essential nature of these products, it is unlikely customers will try to shop elsewhere to reduce costs. This gives the corporation a competitive advantage, in my opinion.
As mining outfits like Rio ramp up production to meet rising demand, they will need to invest in their production facilities. They will need to maintain and enhance facilities’ capabilities. This suggests Weir’s growth potential over the next couple of years is pretty strong.
Challenges and opportunities
Despite their attractive qualities, these companies will both face some challenges as we advance. Economic disruption and supply chain issues could push up prices. They may not be able to pass all of these price hikes on to consumers. Further, commodity prices can be incredibly volatile. If they suddenly fall off a cliff, these firms may suffer a decline in profitability.
Even after taking these headwinds into account, I believe these are some of the best shares for me to buy now in the mining and engineering sectors. There are other opportunities, of course. Rio’s peer, Anglo American, exhibits similar qualities to the iron ore giant.
Nevertheless, I believe these two businesses are some of the best corporations in the most exciting sectors I could own right now. As the world rebuilds over the next five to 10 years, I think these two companies should be able to capitalise on the rebound.
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Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended Weir. 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.