I think there’s plenty of value in UK shares right now. After what’s been nothing short of a gruelling few years, investors seem to have fallen out of love with what the UK has to offer. But to be honest, I’m not concerned by this.
Instead, I’ve swiftly moved to snap up some bargains. A large amount of stocks now look incredibly cheap. What’s more, many offer meaty yields too. I want to swoop in and buy them before the rest of the market catches on.
This is a method I’ve used in years gone by. And although ‘New Year, new me’ is a phrase often heard at this time, I’m not deviating from my plan. If anything, I’m eager to use the first few weeks of 2024 to add to my portfolio.
An opportunity
I buy for the long run. Any stock I purchase today I intend to hold for five years minimum. This is the best and most sustainable way to profit from the stock market. That said, I expect to hit a few bumps in the road along the way.
The next year will be volatile. The UK faces multiple headwinds. Inflation is falling, but it still lingers. Rising borrowing costs are an issue too. Add to that a UK General Election, and that makes for a cocktail of uncertainty.
However, I’d argue it also makes it one of the best times to buy. The FTSE 100 now trades on just 10 times earnings. That looks like an opportunity. As interest rates begin to fall towards the tail end of 2024, I’m also hoping we’ll begin to see UK shares move in the right direction.
What I’m buying
So, as a bargain-seeking investor, what sort of companies am I looking at?
One I have my eye on is Barclays (LSE: BARC). I already own some shares. But trading on just 4.6 times earnings, the Blue Eagle bank look like a steal.
To add to that, it currently yields 5%. And while dividends are never guaranteed, its payout is covered a whopping 4.4 times by earnings. That makes it one of the most well-covered yields on the UK market. Many are forecasting it to lift its yield when it delivers its 2024 results, which is an added bonus.
Its share price dropped 10% last year as the economic environment continued to weigh down on banking stocks. And I’m expecting further uncertainty going forward. It’s benefited from higher interest rates. However, it may be that the boost that banks have seen to their net interest margins (NIMs) as a result is drying up. In its Q3 results, it downgraded its previous prediction for its NIM to come in between 3.05% and 3.1% from 3.15%.
Nevertheless, a CET1 ratio of 14% highlights its strong balance sheet. I expect Barclays to be able to navigate any challenges it’ll face in the months ahead.
At its current price, it seems investors have turned their backs on Barclays. However, it’s exactly these types of companies I’ll be buying today with any investable cash I have. By doing so, I’m hoping to see some handsome returns in the long run.
