I’d rush to buy these UK shares while they’re cheap

As a group, UK shares have done well recently. But Stephen Wright thinks there are buying opportunities in two stocks the market is overlooking.

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On the whole, the last 12 months have been pretty good for UK shares. The FTSE 100 is up 12%, and the FTSE 250 has advanced by 8%.

A closer look, though, reveals that some stocks have been left behind. And I think there are buying opportunities right now in the companies the market is overlooking. 

Buying opportunities

As Warren Buffett notes, investors pay a heavy price in the stock market for a cheery consensus. When everything looks good for a company, its shares generally don’t sell at a huge discount.

On the other hand, significant declines in share prices aren’t always a sign of long-term issues for businesses. Sometimes the market overreacts to a temporary headwind. 

I think that’s happening at the moment in certain sectors, which is why I wouldn’t be hanging around if I had cash to invest right now. Here are two UK shares I’d buy at today’s prices.

Croda International

A 30% decline in the Croda International (LSE:CRDA) share price makes it the FTSE 100’s worst performer over the last 12 months. But I think a lot of the recent decline is an overreaction. 

Croda is a specialty chemicals business. It products are used in a number of industries, including consumer beauty products, crop protection, and pharmaceutical drug development.

During the pandemic, the company experienced a surge in sales, especially for its lipids, which are used in mRNA vaccine development. And the stock surged as a result. 

Since then, though, demand has fallen sharply as a result of high inventory levels. This has caused profits to decline and the share price has dropped as a result. 

Right now, though, the stock is priced as though demand is going to remain subdued for some time. I think this is a mistake and customer inventory levels should normalise sooner than investors expect. 

I’m not anticipating a return to the kind of profitability the company experienced in 2021 and 2022. But even if things return to a more normal level, it looks to me as though Croda’s shares are cheap.

Dr. Martens

Another UK company whose shares have been suffering from some short-term issues is Dr. Martens (LSE:DOCS). Over the last 12 months, the stock has fallen by just under 39%.

As with Croda, the boot manufacturer has been dealing with inventory issues. But unlike the chemicals company, these are very much of its own making. 

Over the last few years, Dr. Martens has been moving its business away from wholesale distribution and towards a direct-to-consumer (DTC) model. On the face of it, this is a good idea, since it offers the prospect of higher margins.

Unfortunately, though, the process has been expensive and complicated. Inventory issues and costs have been weighing on profits for some time, which has been bad for shareholder returns.

Nonetheless, I think the stock looks cheap at today’s prices. The DTC model might be expensive to set up, but the long-term outlook for the company seems positive to me. 

The firm has been attracting the attention of activist investors, who believe the business can and should be doing better. With that in mind, I’d look to buy the stock before the price shows signs of picking  up.

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 Croda International 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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