The wonderful thing about being a private investor is that I’m free to decide where my money goes and — just as importantly — when. This means I can sit on the sidelines, ready to snap up quality FTSE stocks that (temporarily) drop in value.
While I could be wrong, I think this looks to be the case with a few UK shares today.
Down… but not out
Relative to earnings, shares in property portal Rightmove (LSE: RMV) haven’t been this cheap for a while. Considering this company consistently boasts some of the largest profit margins in the entire UK stock market, that feels like an opportunity.
This isn’t to say that the current valuation is wrong. Right now, the business must contend with a sluggish housing market brought about by last year’s multiple interest rate hikes.
However, we seem to be through the worst. With inflation continuing to cool, many analysts are predicting the Bank of England will begin cutting rates this year.
Sure, the stock could remain volatile if cuts don’t come fast enough or they aren’t as significant as first hoped.
But I reckon the long-term investment case remains strong considering the UK’s obsession with property, the ongoing shortage of it and Rightmove’s dominant position.
Patience required
Another FTSE stock trading at a big discount relative to its average valuation over the years is financial services provider Hargreaves Lansdown (LSE: HL).
Again, I don’t think we should be surprised. With the cost-of-living crisis still with us, people will be less inclined or able to invest.
More recently, there has been concern that profits could be impacted by another issue. Firms in the sector have been warned by the Financial Conduct Authority (FCA) against charging customers for holding cash and then retaining some of the interest they earn on it.
When it rains, it pours.
On an optimistic note, I suspect a lot of this is priced in. The rise in the number of people recognising the need to take control of their financial futures should also mean Hargreaves’ total addressable market will continue growing. For now, the cashed-up FTSE 250 member remains the biggest player in what it does.
There’s even a chunky 6.2% dividend yield in the offing for those prepared to wait.
Storm in a teacup?
CVS Group (LSE: CVSG) looks cheap compared to its average valuation over time as well.
Then again, the Competition and Markets Authority’s (CMA) ongoing probe into the British veterinary services industry goes some way to explain this.
There’s a chance that the CMA’s report will confirm that prices are already sufficiently transparent. Should this happen, I reckon the shares will rocket.
Probe aside, the outlook for CVS looks positive to me. Thanks in part to the pandemic, we know that pet ownership has jumped in the UK in recent years. Spending on our furry (and not-to-furry) friends is also far less discretionary than it once was.
But there’s always a risk things won’t turn out well.
If I had the cash, I’d be tempted to take a position here. But I’d check that my portfolio wasn’t already exposed to the pet industry via other holdings.
This should help to cushion the blow if this stock isn’t quite the ‘bargain’ I think it might be.
