Thanks to the 2022 stock market correction, there are plenty of high-quality UK stocks to buy right now at wonderful prices. That’s terrific news for long-term investors since buying undervalued shares in top-notch companies, even with only £3k, is a proven recipe for success.
After searching for lucrative opportunities, I’ve identified two businesses in particular that I believe have compelling investment cases. So much so, I’ve recently added both to my income portfolio.
Powering critical electronics
As technology evolves, the demand for increasingly complicated electronic systems is rising. And this trend is something that XP Power (LSE:XPP) is having little difficulty capitalising on. The firm is a designer and manufacturer of electronic components, primarily catering to the healthcare, industrial, and semiconductor manufacturing industries.
However, it recently found itself in some legal hot water, resulting in a $40m penalty. And this judgement, unsurprisingly, sent the share price crashing 70% between January and October 2022. Obviously, that’s not a good look. But it seems investors may have overreacted, potentially turning it into a superb stock to buy now.
While frustrating, the legal fine doesn’t compromise XP Power’s balance sheet. And while there is the risk of reputational damage, it seems most customers remain loyal to the business as a supplier. Its latest trading update announced record revenues of £290.6m, up by 21% versus a year ago. Meanwhile, supply chain disruptions are finally resolving, accelerating order fulfilment.
With an order book of £362.7m, the firm seems to be in a prime position to thrive in 2023. Needless to say, these financials are impressive. And when paired with a significant decline in share price over an unfortunate but short-term issue, I can’t help but feel a buying opportunity has emerged. And given that the share price has surged by 56% in the last four months, others seem to agree.
The best UK stock to buy now?
Another company whose financials don’t seem to match the share price direction is Londonmetric Property (LSE:LMP). The business is a real estate investment trust specialising in commercial properties such as warehouses and retail outlets.
With interest rates on the rise, the value of its property portfolio has been steadily diminishing. And consequently, its valuation has been dragged down to reflect this. But as an income investor, my main concern is the state of cash flows. After all, the core business model of Londonmetric is to generate profits through rent, not asset flipping.
As it turns out, even though online spending has tapered due to the cost-of-living crisis, demand for well-positioned warehousing remains high. So it shouldn’t be surprising that net rental income is actually up by 14%, reaching £72.1m.
With bolstered cash flow, management has subsequently increased shareholder dividends from 4.4p to 4.6 per share, resulting in a yield of roughly 5% today. Obviously, the rising cost of debt does pose a threat. And it will undoubtedly impact the firm’s ability to expand as rapidly as in the last decade.
However, given the continued rise in e-commerce and management’s proven track record of delivering reliable income, it’s a risk I feel is worth taking. That’s why I believe it could be one of the best UK stocks to buy now and why I recently became a shareholder.
