With all the uncertainty in the air, I think it’s a good time to go shopping for UK stocks to buy now. When the outlook is a little murky, there’s often the potential to pick up stocks when they are assigning cheaper valuations to their underlying businesses.
It’s the classic approach taken by multi-billionaire investor Warren Buffett. He’s on record as saying we often pay a high price for a cheery consensus. And the opposite is true. When people are worried about something, valuations can drop. Therefore, careful stock purchases at such times can lead to enduring and profitable long-term investments.
Quality businesses behind top UK stocks
Of course, outcomes aren’t always positive. Even buying at lower valuations doesn’t guarantee investment success. And it’s no good just buying any old cheap stock. Buffett is very careful with his selections with a big focus on the quality of the enterprise as well as its prospects for growth. And when he finds a great business he likes, he often describes it as “wonderful”.
In his letter to Berkshire Hathaway shareholders for the 2021 trading year, Buffett described himself as a ‘business picker’ rather than a ‘stock picker’. And that comment underlines his approach to buying and holding stock investments.
He buys stocks to hold with the same business-like perspective and tenacity that he buys entire enterprises. So he carries out plenty of research and due diligence before buying.
Indeed, Buffett is no stock jockey in the game for a quick buck. Instead, he’s a long-term investor focused on the internal dynamics and economics of each business behind the stocks he’s holding. And that long-term perspective has served him well over decades.
Therefore, with £3,000 to invest, I’d aim to copy Buffett’s strategy. And that means looking for quality stock investments with the potential to deliver meaningful returns over a long holding period.
Focusing on the London market
Meanwhile, US investor Jim Cramer has been warning investors to steer clear of the big tech companies. Names such as Meta (Facebook), Amazon, Apple, Netflix and Alphabet (Google) have delivered impressive returns for shareholders over recent years. But the macroeconomic landscape is changing. Interest rates are on the rise and those previous winners with often high valuations may not do as well going forward, he reckons.
However, here in the UK, we have many quality businesses with moderate valuations. Their growth prospects may not be as spectacular as some of the US companies but they are worth having. And we’ve also got many cyclical outfits that could thrive in the current environment.
Indeed, I’ve heard the mix of businesses in London has been attracting interest from international investors. And I see the UK market as a good place to put money right now.
So I’d aim to spread my £3,000 between names such as smoking product provider British American Tobacco, soft drinks company AG Barr and oil giant BP. But, of course, there’s no guarantee of positive performance from these stocks even if I hold them for a long time.
Nevertheless, after doing my own research, I’d embrace the risks in the pursuit of long-term gains.
