2 UK shares I like better than Rolls-Royce

With P/E ratios below 12 and dividend yields above 4%, Stephen Wright looks at the UK shares he thinks are trading below their intrinsic value.

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Key Points

  • Shares in Rolls-Royce are up more than any other FTSE 100 stock since the start of the year
  • Ibstock has a strong balance sheet and a leading position in a market with a structural tailwind
  • Barclays has a combination of retail and investment banking that allows it to make money whether interest rates are high or low

As a value investor, I look to buy shares when they trade below their intrinsic business value. Right now, I think there are some great opportunities in UK stocks.

Rolls-Royce Holdings has been leading the FTSE 100 since the start of the year and the stock is up 66% over the last 12 months. But it’s not the engine manufacturer that’s catching my eye.


I think that brick manufacturer Ibstock (LSE:IBST) could be a great long-term investment. The stock is up around 7% since the start of the year and I’m looking to buy it before it goes any higher.

Unlike Rolls-Royce, the company has been buying back shares and investing to boost its production capacity. I expect this to pay off over the next few years.

At today’s prices, Ibstock shares don’t look expensive to me. The stock trades at a price-to-earnings (P/E) ratio of 11 and pays a dividend with a yield of 5%.

Ibstock’s biggest risk is competition – there are a number of UK brick companies. By contrast, the capital-intensive, technical nature of aerospace engineering protects Rolls-Royce from potential disruptors.

I don’t see this as a significant cause for concern, though. Around 30% of bricks used in UK building are imported, due to demand outstripping supply.

Even with existing manufacturers increasing capacity, there’s still an expected shortfall of 11%. As a result, I think that the market is big enough to allow all of the participants to do well.

Ibstock has a solid balance sheet and a leading position in a market where demand looks set to outstrip supply for some time. I think that this makes the stock an attractive investment proposition.


Barclays (LSE:BARC) all look like good value at the moment. The stock is up 3% since the start of the year and I’m looking to add it to my portfolio later this month.

Unlike Rolls-Royce – and unlike other FTSE 100 banks – I think that Barclays is well positioned to cope with any macroeconomic environment. That’s part of the attraction for me as an investor.

The company combines a retail business with one of the largest investment banking operations in Europe. This gives it the opportunity to do well whether interest rates are high or low.

In 2022, Barclays benefited from rising interest rates in its retail operations. The bank’s net interest income (interest received on loans minus interest paid on deposits) grew by 13%.

When rates were lower during the pandemic, the investment banking operations came to the fore. I think this means Barclays can offer some relative stability during any economic climate.

The risk with the business comes from regulation. UK regulation is stricter than elsewhere in Europe and there’s a risk that this could limit the company’s profits in future.

As I see it, though, this risk is more than offset by the current share price. The stock trades at a P/E multiple of around 6 and has a dividend yield of 4%.

Compared to Rolls-Royce, I think Barclays offers a much more stable investment proposition. That’s why I prefer it at today’s prices.

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.

Stephen Wright has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays Plc and Ibstock Plc. 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.

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