I believe many quality UK shares are trading at discount levels. Let’s break down why and explore some of the stocks I like right now.
Why are UK shares falling?
I believe UK markets have been struggling for some time. In fact, I believe it goes as far back as Brexit. This is because there is lots of uncertainty around economic activity in the UK as well as its competitiveness now that it is moving away from the European Union.
When you add the pandemic to this, UK shares have had a turbulent few years. At present, the economy is in a tough position due to soaring inflation as well as rising interest rates. Both these aspects have pushed many shares down. It is worth noting that many countries throughout the world are suffering from high levels of inflation, therefore, it is not only UK markets that are struggling.
Despite the current issues presenting short-term challenges and potential for further volatility, my investment strategy has always been for the longer term. I’m trying to look past the current environment towards greener pastures. If I pick up cheaper shares now, I could experience excellent growth and income in the future. I’ve earmarked a couple of UK shares I like the look of below.
Financial services stock
The first stock I like is Legal & General (LSE: LGEN), which is a UK-based business best known for its life insurance products but that has a diverse offering. I’m buying some shares imminently. I believe its diverse set of operations could protect it against the current headwinds experienced by the economy.
Legal & General shares look dirt-cheap to me right now on a price-to-earnings ratio of just six. In addition to this, there is a juicy dividend yield of close to 9% on offer for passive income. Furthermore, Legal has an excellent record of dividend payout. However, I do understand that dividends are never guaranteed.
One issue I must note for Legal is that its investment arm is linked to the equity and credit markets. With current markets in a volatile place amid rising interest rates, performance and returns could be impacted here, like many other UK shares.
Legal & General has a new CEO arriving in January 2024. This is exciting for growth purposes as the new CEO, António Simões, has great international experience and will be looking to identify new growth channels abroad.
Telecommunications
My next pick is Vodafone (LSE: VOD), which is one of the largest telecoms businesses in the world.
Vodafone shares possess an enticing dividend yield of 10%. Furthermore, the shares look dirt-cheap due to market pullback, trading on a price-to-earnings ratio of just two.
From a bearish perspective, Vodafone does have a fair bit of debt on its balance sheet. In the shorter term, this could be more costly to service due to higher interest rates. This can impact growth plans and investor returns.
Speaking of growth, Vodafone can consolidate its position as one of the biggest telecoms players through plans to expand in the African market, where it already has a position. This could boost future earnings and returns.
To conclude, I’m expecting some volatility but right now I believe there are some UK shares that are too good to miss out on.
