2 beaten down UK shares to buy in a heartbeat

Many UK shares have suffered under the current economic hardships. Here are two that I think are screaming buys.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

In general, UK shares have outperformed global stocks of late. Over the past year, the FTSE 100 has risen nearly 6%, whereas the S&P 500 has dropped 9% and the Hang Seng has sunk over 20%. But this success has mainly been due to the performance of a few individual companies, such as AstraZeneca and some of the big oil giants. Therefore, many UK shares are still trading at multi-year lows and look very cheap for the long term. Here are two I’d pick up today. 

A recent crash

Hotel Chocolat (LSE: HOTC) is a British high-end chocolatier, recognised for its excellent quality. However, on Tuesday, the company announced that it expected a statutory loss for FY22, which led to this UK share plunging nearly 50% in a day. 

Although the company has been performing well, Hotel Chocolat was affected by its subsidiaries in both Japan and the US. In fact, after an internal business review, the company has decided to close its retail stores in the US. This will lead to costs of £3m, including future lease liabilities and landlord deposits. At the same time, the board also acknowledged the potential to have to pay a full impairment charge of £23m, due to a revised assessment of the likelihood of recovering loans made to its ailing Japanese joint venture. 

These factors meant that as well as the company expecting a statutory loss for the year, it predicts lower sales growth and profit margins for FY23 too.

However, there are many positive signs. For example, revenue growth in the latest year totalled £226m, up 37% year-on-year and ahead of market consensus expectations. This was primarily due to growth in the UK market. Further, for the long term, the group also expects “less risk and an even stronger balance sheet with a higher profit percentage growth in FY24 and FY25”.

Therefore, I’m not too worried about the recent crash and believe that the recent dip makes it an excellent time to buy. I may add some Hotel Chocolat shares to my portfolio. 

An internationally focused UK share

Burberry (LSE: BRBY) is a historic British luxury fashion house that gained a new lease of life in recent decades. It has managed to expand internationally, with over a third of its business exposed to the Chinese market. However, recent lockdowns in China have strained Burberry’s business there. 

For example, Q1 sales in Mainland China fell by 35% year-on-year, and in the Asia Pacific region, sales fell by 16% in the period. This meant that, at a constant exchange rate, comparable store sales only increased by 1% year-on-year, far slower growth than the group wished for. 

However, there are still many positive signs. First, the company has just commenced its £400m share buyback, which is expected to be completed by the end of the year. Second, the European part of the business saw sales increase by 47% year-on-year, driven by the rebound in tourism and higher sales to locals. This is a great sign moving forwards. Finally, according to the company, there are signs that Mainland China performance has been improving since stores reopened in June.

Therefore, I think that this UK share should be able to overcome the current struggles and would be an excellent addition to my portfolio. 

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 assessed. Consider taking independent financial advice.

Stuart Blair has no position in any of the shares mentioned. The Motley Fool UK has recommended Burberry and Hotel Chocolat. 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.

More on Investing Articles

Investing Articles

Up 670% in 2 years! This former penny share is skyrocketing on SpaceX contracts

Shares of Filtronic (LON:FTC) were soaring to multi-year highs today after another contract win with SpaceX. Should I buy this…

Read more »

Investing Articles

Why is the Greatland Gold (GGP) share price up 10% today?

Our writer looks at the reasons why the Greatland Gold (GGP) share price is the AIM 100’s best performer today.

Read more »

Passive income text with pin graph chart on business table
Investing Articles

What do I need for a passive income of £100k a year?

How much would I need to invest to collect a very healthy yearly passive income on my retirement? Surprisingly, the…

Read more »

US Stock

£2k invested in Nvidia stock 2 years ago is now worth this boggling amount…

Jon Smith details how much unrealised profit an investor would have from buying Nvidia stock but is cautious about what…

Read more »

Investing Articles

2 value stocks that still look cheap despite the FTSE rally!

Harvey Jones picks out two UK value stocks that still look nicely priced even as the UK index climbs. He…

Read more »

Dividend Shares

I asked ChatGPT to build the perfect passive income portfolio and here’s the result

Jon Smith turns to the world of AI to try and find out whether ChatGPT could build an investor a…

Read more »

Investing Articles

£20,000 to invest? Here’s how the FTSE 100 could deliver a £2,040 passive income

Here are two ways that investors with a lump sum to spend could target a large passive income with FTSE…

Read more »

Runner standing at the starting point with 2025 year for starting in new year 2025 to achieve business planing and success concept.
Investing Articles

Here’s how someone could start investing in 2025 with just £1,000

Planning to start investing in 2025? This writer highlights two very different stocks that might be worth considering for a…

Read more »