3 value stocks I’d buy right now

Roland Head thinks market conditions could favour value stocks over the coming year. He’s found three he’d like to buy today.

| More on:
Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.

Image source: Getty Images

Falling share prices are always uncomfortable, but I think some good opportunities are emerging from recent dips. I want to look at three UK value stocks that I’d be happy to add to my share portfolio today.

A dirt-cheap bargain?

Royal Mail (LSE: RMG) shares have fallen by more than 30% over the last year. This slump has left the shares trading on six times forecast profits, with a prospective dividend yield of 6.8%.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

Admittedly, profits are expected to fall this year as the boost from the pandemic fades. Rising fuel and labour costs are also a potential concern.

Even so, brokers’ consensus estimates suggest that Royal Mail will generate £349m of surplus cash in the 2022/23 financial year, rising to £412m in 2023/24.

My sums suggest that the near-7% dividend yield should be comfortably covered by Royal Mail’s cash generation, reducing the risk of a cut. An added attraction is Royal Mail’s large property portfolio. This business has plenty of asset backing, in addition to its trading profits.

I think Royal Mail looks like a classic value stock at current levels. I may add the shares to my portfolio in the coming weeks.

Energy market opportunity

My next pick is energy services firm Wood Group (LSE: WG). This business started out as a North Sea oil services provider, but offers a much broader range of energy operations today.

Unfortunately, the group’s diversification has coincided with a difficult period for energy markets. Debt has remained stubbornly high in recent years and profits have been disappointing.

Wood Group’s share price has dropped 15% over the last year and is 70% lower than five years ago. However, I think we’ve seen the bottom.

Wood is now selling its infrastructure business, which always looked like a mis-matched acquisition to me. At the same time, I expect the group’s core energy business to be enjoying improved demand, due to higher oil prices, plus continued growth in renewable projects.

Wood Group’s turnaround has taken a lot longer than expected. It’s not over yet. But this business is expected to return to profit in 2022 and could resume dividend payments in 2023.

Right now, I think Wood Group could be one of the best value opportunities in the energy sector.

An overlooked value stock

Chemicals group Synthomer (LSE: SYNT) has its heritage in the Malaysian rubber industry. Today, it produces a wide range of polymer-based products. These include latex gloves, foam for consumer goods, adhesives, and chemicals used by industrial customers.

The last three years have been a rollercoaster for shareholders. The shares rose from a low of 205p in March 2020 to 550p in 2021, as demand for latex gloves boomed during the pandemic.

Market conditions are now returning to normal and Synthomer shares have dropped back to around 300p.

One risk I can see is that slowing economic growth could have a knock-on effect on demand. With the boost from the pandemic gone, profits could disappoint.

However, I think that the share price already provides a fair margin of safety. Based on broker forecasts, Synthomer shares trade on less than eight times forecast earnings, with a dividend yield of 5.4%.

Synthomer could be the next stock I buy for my portfolio.

Should you invest £1,000 in Royal Mail Group right now?

Before you consider Royal Mail Group, you’ll want to hear this.

Motley Fool UK's Director of Investing Mark Rogers has just revealed what he believes could be the 6 best shares for investors to buy right now… and Royal Mail Group wasn’t one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 shares that are currently better buys.

All you need is an email address to get started

Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Synthomer. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Should you invest the value of your investment may rise or fall and your Capital is at Risk. Before investing your individual circumstances should be considered, so you should consider taking independent financial advice.

More on Investing Articles

Smiling senior white man talking through telephone while using laptop at desk.
Investing Articles

£10,000 invested in BT shares 10 years ago is now worth this much

It's painful to remember that BT shares reached over £10 at the peak of the dot com bubble in 1999.…

Read more »

Close-up Of A Piggybank With Eyeglasses And Calculator On Desk
Investing Articles

Is now the time to buy bank shares?

Our writer considers whether bank shares could be a bargain buy for his portfolio right now -- or a potential…

Read more »

Happy young female stock-picker in a cafe
Investing Articles

After steep falls, are Royal Mail shares a steal?

Royal Mail shares have more than halved since peaking a year ago. After months of steep falls, this popular stock…

Read more »

Young Woman Drives Car With Dog in Back Seat
Investing Articles

Dirt-cheap, 1 of my best stocks to buy also pays an above-average dividend!

This Fool has decided to buy the shares on his best stocks to buy now list with the shares looking…

Read more »

Light bulb with growing tree.
Investing Articles

The AFC share price just tanked! Is now the time to buy?

The AFC share price fell nearly 10% on Wednesday after the H1 revenue announcement. So, should I add this stock…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

These shares have been growing dividends for decades. I’d buy!

Our writer considers the merits for his portfolio of buying two shares with a track record of growing dividends.

Read more »

Close-up of British bank notes
Investing Articles

Is the M&G dividend yield heading to 10%?

As the M&G dividend yield heads towards double digits, out writer explains why he is considering buying more of the…

Read more »

man in shirt using computer and smiling while working in the office
Investing Articles

3 top dividend shares to buy now

With weakness in the markets, I reckon it's a good time to search for top dividend shares to buy now.

Read more »