The best UK shares to buy now may not necessarily be those companies with the strongest growth prospects. Similarly, they may not be those stocks that trade at the cheapest prices. Rather, they could prove to be shares that have both of these qualities. That means offering good value for money based on their price level and future prospects.
Through buying such businesses, it may be possible to outperform the stock market to make a 100% return at a faster pace. Here’s a simple strategy for unearthing the best value shares. I think this could boost the performance of a £5,000 investment, or any other amount, in the coming years.
Turnaround opportunities could be among the best UK shares to buy now
Some of the best UK shares to buy now could be those businesses that offer turnaround potential. For example, they may have experienced difficult operating conditions as a result of disruption caused by coronavirus. Or they may have failed to increase sales because of a weak economic performance. This may have resulted in their shares trading at lower prices than they have done for some time. So they may offer scope for a stock price recovery from their current levels.
In some cases, such businesses could be undervalued by investors. The stock market has a long history of experiencing booms and busts, with neither having lasted in perpetuity. Therefore, companies that have the financial means to survive and the strategy to overcome changing operating conditions could be undervalued at the present time.
It is possible to identify the best UK shares through analysing their financial statements and management commentary. This provides guidance regarding the chances of them navigating future challenges. It also guides on whether they have the financial means to do so. Where they do, and they are underappreciated by investors, they could prove to be among the best stocks to buy now.
Investing money in shares for the long run
A diverse portfolio made up of turnaround opportunities could realistically produce a 100% return at a faster pace than the wider stock market. After all, an economic boom and long-term bull market are both very likely in the coming years. They are made more likely by the scale of monetary policy stimulus already announced in the UK, as well as other countries such as the US. This could provide ideal conditions for today’s undervalued stocks to rise in value as an economic recovery develops, and investor sentiment improves.
Even if today’s best UK shares match the stock market’s past returns, the doubling of an initial investment is a realistic goal for a long-term investor. For example, the same 8% annual total return provided by the FTSE 100 in recent decades would double an investment within nine years. As such, now could be the right time to start investing £5,000 in today’s undervalued, and unappreciated, companies.
