In my opinion, outside of exceptional market conditions, there’s almost never a bad time to invest in the stock market.
Why? Because while timing can certainly influence short-term gains, buying stocks with the intention of holding them for the long term enables investors to endure temporary periods of market volatility.
But with that said, I think now could be a fantastic opportunity to buy undervalued British shares. Here’s why.
The cheapest in the world
Analysis published last month by Morgan Stanley stated that UK equities and bonds are arguably the cheapest in the world.
In accounting for this observation, the US financial services firm told its clients that investor pessimism towards the UK stock market is high. However, the relatively poor sentiment might change if inflation begins to decrease.
While acknowledging the inevitable challenges ahead, the bank’s analysts hold a positive view on a variety of British stocks.
Among those cited were BAE Systems, Ashtead, 3i, BP, Smith & Nephew, Haleon, Prudential, Rio Tinto, AstraZeneca, Segro, and SSE.
It’s apparent that Morgan Stanley’s preferences lean towards larger corporations. In my view, that’s likely due to a number of reasons such as the stability and reliability that usually comes with larger firms that boast established track records.
Moreover, with the exception of Segro (commercial property investor) and SSE (Scottish energy company), their exposure to the UK’s domestic economy is fairly limited.
Nevertheless, it’s a strong selection of companies and I’ll continue keeping a close eye on most of them.
Will the UK stock market ever go up?
I’m conscious that UK shares have been labelled cheap for a while now.
This tells me there have been certain issues causing prolonged performance difficulties.
What’s more, many of the factors holding UK stocks back today aren’t going to disappear overnight.
In my eyes, the problems stem from a variety of factors. These include shaken investor confidence post-Brexit, the aftermath of the mini-budget, and the recent strength of the pound.
Regardless, today’s market conditions remind me of billionaire investor Warren Buffett’s principle of being greedy when others are fearful.
Such a mindset encapsulates Buffet’s contrarian and value-oriented investment philosophy.
Playing the long-term game
Ultimately, if UK shares are genuinely undervalued, the likelihood is that they won’t stay that way forever.
After all, the long-term benefit of buying undervalued shares lies in the potential for substantial share price gains as a combination of market perception and investor sentiment catches up with a company’s true value.
So, by hoovering up a selection of cheap UK shares, my hope is to acquire assets at a lower cost in order to position my portfolio for greater returns when the market eventually recognises the strong fundamentals, growth potential, and financial health of the British companies I’ve invested in.
