2 British value stocks I’d snap up

Our writer has been scouring the UK market for value stocks he could add to his portfolio. Here are two he likes the look of.

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Image source: GSK plc

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Value stocks can be confusing. If I look at a share and it seems weirdly cheap, why is that? Have other investors seen something I have missed?

Right now, there are quite a few shares listed on the London market that I think potentially offer me great value when considering today’s price and their long-term prospects.

Here are two value shares I would happily buy for my portfolio at the moment, if I had spare cash to invest.

GSK

Pharma giant GSK (LSE:GSK) counts as a value share, in my book, with its price-to-earnings (P/E) ratio currently sitting at 9.

The company owns a host of brands across both general and specialty medicines. Thanks to its wealth of product patents, it has a competitive advantage that gives it pricing power it can turn into profits.

That helps fund a dividend. The yield is currently sitting at 4.3%, so owning this value stock could provide a welcome boost to my passive income streams.

The power of its business model came into focus again last week. Based on its strong third quarter performance, the company lifted its profit outlook for the full year.  

All shares have risks, of course, and GSK is no exception. For example, expiring patents could lead to some revenue streams drying up in years to come. But the breadth of the firm’s product portfolio, its proprietary technology and long-established sales channels all make it attractive to me.

Having spun its consumer brands business off as Haleon, I think GSK now has a clearer focus than it has had for a long time. Hopefully, the latest strong quarter is simply a sign of a business getting ever more into its groove.

British American Tobacco

I already own quite a few shares in Lucky Strike maker British American Tobacco (LSE:BATS). But I would be happy to buy more.

One key argument against the share is the long-term decline in cigarette smoking rates. That is a big threat to revenues and profits. I also think it is one reason this value stock trades on a P/E ratio of just six.

But although cigarettes are declining in popularity, they remain huge business. I think there will be demand for cigarettes for decades to come. BAT’s global reach means that it can still power on even if individual markets see a sharp downturn in smoking rates.

On top of that, it has a stable of premium brands. Not only does that give it pricing power for the 600bn cigarettes it sells annually, it also positions the firm well to build its business in product lines such as vapes.

British American Tobacco is a free cash flow monster, with a 9.1% dividend yield. It is one UK value stock I would happily own for decades!

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.

C Ruane has positions in British American Tobacco P.l.c. The Motley Fool UK has recommended British American Tobacco P.l.c., GSK, and Haleon 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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