Best UK shares to buy in December 2022

As winter approaches, identifying what could be some of what could be the best UK shares to buy right now is becoming ever more problematic.

A key issue is the sheer pace of political change, affecting both fiscal and monetary policy. New PM Rishi Sunak together with Chancellor Jeremy Hunt have eviscerated the poorly received Truss-era mini-budget and are in the process of designing a replacement budget for 17 November.

CPI inflation, already at 10.1%, is likely to increase further soon, with Cornwall Insight predicting the average UK domestic energy bill will rise to circa £3,700 per annum when the price guarantee ends in April. And the Bank of England base rate now stands at 3%, with further rises to above 4% baked into market expectations.

Further, tax rises and spending cuts are coming. And global recession fears, sparked by the lingering aftereffects of the pandemic, supply chain crunch, labour shortages, and Ukraine war, could soon drastically metamorphize into reality.

The central bank’s governor, Andrew Bailey, has now upped his UK recession forecast to two years, calling an end for mid-2024. This ‘very challenging outlook’ would drive unemployment to 6.5% and constitute the longest recession in a century.

Accordingly, this makes selecting the best UK shares to buy somewhat of a challenge.

Best UK shares to buy in December 2022

1. Premier African Minerals (LON: PREM)

Premier African Minerals is a FTSE AIM lithium explorer, which owns various gold mines and a 100% interest in the Zulu Project, which could be the largest undeveloped lithium mine in Zimbabwe.

Lithium prices have been rocketing to record highs in 2022, most recently to 593,500 CNY/tonne. The FTSE AIM operator hopes to capitalize on these price movements, expecting its first deliveries to begin in Q1 2023. And production is set to eventually ramp up to 50,000 tonnes of spodumene concentrate per year.

The company has signed an offtake agreement with Suzhou TA&A Ultra Clean Technology Company, which has also injected $35 million into the construction of PREM’s pilot plant. Suzhou maintains a 13% interest in the lithium explorer, and speculation is mounting that it could soon make a full buyout offer as security of lithium supply becomes paramount.

The company’s shares are already up 158% year-to-date to 0.49p. Of course, penny share investing is not without its risks.

2. ITV (LON: ITV)

ITV shares have dipped by more than a third year-to-date, crashing out of the FTSE 100 to just 72p apiece today. This steep fall was catalyzed by the company’s plan to ‘supercharge our streaming business’ which was met with investor dismay back in March.

However, the correction has left the legacy brand with an attractive dividend yield of 6.9%. Further, its share price has increased by 21% over the past month, signifying that ITV was, and perhaps still is, oversold.

Moreover, its streaming move may yet pay off. With 10,000 hours of free content expected to launch on ITVX in early December, ITV shares could stand to rapidly benefit, as consumers cancel paid subscriptions and look to free alternatives in response to the cost-of-living crisis.

It’s also worth noting that the FTSE 250 operator is still one of the largest independent producers in the world, and moreover that 93% of the UK’s top 1,000 commercial broadcast programmes on TV were ITV-based last year.

3. IAG (LON: IAG)

The past couple of years has been a frustrating experience for IAG investors. But recent Q3 results may have finally marked the turning point, as the British Airways, Vueling, and Iberia owner generated an operating profit of €1.21 billion, a significant improvement over the €452 million loss of Q3 2021, and roughly in accordance with most analyst expectations.

Generating €7.3 billion in revenue, the company has told investors that revenues have ‘fully recovered’ from the pandemic as they are now up 0.9% compared to Q3 2019. For context, this even includes the effect of diminished traffic out of Asia because of lingering pandemic lockdowns.

Passenger capacity is up to 81% of Q3 2019 levels, with transatlantic and European short-haul flights at more than 90% of pre-pandemic capacity. The FTSE 100 airline now expects to make annual profits of circa €1.1 billion, despite increasingly expensive jet fuel and the Herculean US dollar.

With staffing issues seemingly at rest, and €13.5 billion in total liquidity, speculation is rife that it could be approaching easyJet and its other competitors with takeover propositions with plans to consolidate the European market.

4. AB Foods (LON: ABF)

AB Foods shares are down 28% year-to-date as the FTSE 100 food and retail group suffered from the wider economic downturn and constrained consumer spending. Best known as the owner of Primark, AB Foods also owns a surprisingly high number of well-known grocery brands including Twinings and Kingsmill, in addition to a sizeable cannabis operation.

In recent full-year results, AB Foods revealed that Primark sales have returned to pre-pandemic levels. And financially, it saw revenue rise by 22% year-over-year to £17 billion, deriving a pre-tax profit of £1.08 billion, an increase of 48%.

However, operating costs also jumped by 21% to £15.7 billion, and the FTSE 100 stalwart has already promised it will limit price increases until next autumn. This could be a savvy move to sap up more market share, as new types of customers downshifting their clothes shopping may be tempted to try the brand for the first time.

Importantly, its diversified businesses mean it should have the defensive qualities necessary to outlast the coming recession.

Of course, if the downturn becomes too severe, the same customers driven to Primark could also be leaving Twinings on the shelves.

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