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We all know that UK shares are currently undervalued compared to those listed elsewhere, particularly in affluent New York. But Goldman Sachs It really exposes the cheapness!
According to the bank's analysts, the shares of the London Stock Exchange They now trade at a 52% discount to their US counterparts. For some sectors, it is even higher. Oh.
Worrying trend
I won't go into detail about how this happened (an entire book could be written on the subject). But the old phrase: “The United States innovates, Europe regulates“, probably gets to the heart of the matter.
Simply put, over-regulation and taxes (particularly stamp duty on purchasing UK shares) lead to reduced liquidity, which can lead to lower valuations.
The consequences are alarming. In 2024, 88 companies delisted or transferred their primary listing from the main London market, but only 18 took their place. Bloomberg says this will be the year with the highest number of delistings in the UK since 2010.
equipment rental company Ashtead Group He is the last to say goodbye to London in favor of New York. It is named after the town in Surrey, England, and will even change its name to Sunbelt Rentals.
Wise heads are needed
There have been some reforms, but clearly more will be needed. Intelligent – a genuine London-listed fintech innovator with a market capitalization of £10.5bn that floated in 2021 – is not even in the FTSE 100!
From what I can gather, Wise has to actively apply for a new category that ensures it meets enhanced and strict regulatory requirements. You might not even bother doing the paperwork to join the Footsie.
Unfortunately, I think it will take a bigger fish than Ashtead for policymakers to really start taking this seriously. If the oil giant Shell (the UK's second largest listed company) raised its stakes, that would probably mark a turning point.
Shell has often traded at a discount to its U.S. publicly traded peers. Meanwhile, Donald Trump has promised “drill, baby, drill“, over there, while Europe is going in the opposite direction. Therefore, the United States seems to me a logical move for Shell and its shareholders in the long term.
Opportunities galore
Of course, a company's global expansion potential is primarily driven by its strategic vision and competitive positioning, rather than its listing position.
So the flip side of all this is that there are almost certainly plenty of bargains on the UK market today.
One stock that I think is very undervalued right now is JD Sports Fashion (LSE: JD). The share price has plummeted 41% so far this year.
Like most retailers, JD Sport has been hit by weaker consumer spending. And the growth problems in Nikeits key partner, certainly hasn't helped. Nike products generally have higher margins, so the American sportswear giant's current weakness remains an issue.
However, the stock now trades on a forward price-to-earnings (P/E) ratio of 6.6. Of course, there are risks specific to consumer spending and Nike, but that rock-bottom valuation seems too cheap to me.
The company has a very strong brand, a profitable business and a growing global (and online) presence. And its strategic partnerships with Nike and adidas give you a competitive advantage over your rivals.
I think this super cheap FTSE 100 stock is worth considering for 2025 and beyond. I recently added some JD Sports shares to my own ISA portfolio.
