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UK stocks have started the year in spectacular fashion. He FTSE 100 has risen 6.9%. He FTSE 250 has also joined the action, rising 6%.
But many UK-listed companies still look like bargains in my opinion. Footsie's average price-to-earnings (P/E) ratio is just 11. That's a far cry from its historical average of between 14 and 15.
What does the store have?
It's been a tough few years for retailers. The pandemic was a once-in-a-lifetime event that sent stock markets around the world tumbling. The record inflation and interest rate increases that followed haven't been much more fun. But it looks like we may finally be coming out on the other side.
I am aware that the above issues could still hamper Footsie's performance this year. While the first rate cut is widely rumored to occur in August, if the Bank of England decided to delay it, markets would undoubtedly react negatively. Of course, I cannot forget that the upcoming elections also add to the current cocktail of uncertainty.
But while the UK will face challenges, considering the valuation of many companies, I am hopeful that in the coming years we can see share prices continue to rise. Many UK stocks look seriously undervalued at the moment. For investors picking stocks for the long term, now could be a great opportunity to dive in and pick up some bargains.
A great action?
An example of a stock that I hope to recover in the near future is Unilever (LSE: ULVR). This year he has performed brilliantly. So far, it has increased by 14.6%. Still, trading with a P/E just below 20, I still think its stock has value. That's below its historical average.
I'm optimistic about the growth opportunities the stock could offer. Under the leadership of CEO Hein Schumacher, the company is advancing its rationalization mission. Schumacher wants to build a business that he can “do fewer things better”. In a bid to focus more on its core brands, Unilever has been shedding its underperforming and capital-intensive units.
It is also a defensive action. That means that during periods of uncertainty, it can add stability to my portfolio. There should always be demand for the essential goods you sell.
That said, it sells premium brands. This means that competition is a threat, as consumers may look for cheaper alternatives. This is especially pertinent during a cost of living crisis.
But I'm still a fan today. And with its 3.4% dividend yield, there's an opportunity to generate some extra cash by purchasing shares. That's by no means the Footsie's best performance. But it hasn't cut its payments in more than 50 years, which is an incredible record.
Barclays He recently imposed a 5,200p price target on the stock. That represents a premium of 18.7% over its current price. With this in mind, I think June could be a smart time for investors to consider looking for cheap UK shares.
