It seems that investors have been shunning UK shares lately. But I’m not complaining. I see plenty of value out there right now.
And I can understand why. It’s been a rough few years for us retail investors. Clearly, people seem to have fallen out of love with what the UK has to offer.
With that, I’m going bargain-hunting. I think a host of shares look cheap. A good chunk of them offer a meaty yield too. That’s a combination I like.
Ignoring the lulls
The reason I see now as such a great opportunity is because I buy for the long term. The stock market is volatile. Unfortunately, this is inevitable.
But is this really a bad thing? I like to remain optimistic. By buying cheap and holding for the years and, ideally, decades to come, there’s the potential for me to make some handsome gains.
The months ahead of us will produce plenty of challenges. Inflation is edging closer to the 2% target set out by the Bank of England, but it’s not there just yet. Interest rates and the impact they have on markets are also something to consider. If that wasn’t enough, we’re likely to see a general election in 2024. Our friends across the pond will also be voting for their next president towards the tail end of the year.
With all that, I wouldn’t be shocked if we see periods where the market takes a wobble this year. That’s not ideal. However, I’d argue it also presents the best times to buy.
An opportunity to buy
So, it’s all well and good for me to say this. But where would I put my money?
Well, I’m eyeing Burberry (LSE: BRBY). It’s been a rough 12 months for the stock. During that time, 47.5% has been shaved off its price.
This is largely due to a slowdown in global spending. As inflation has hit, customers have tightened their belts and cut back on luxury goods. Last November, the firm issued a profit warning. Burberry now expects its 2024 operating profit will come in towards the lower end of its target range of £552m to £668m.
However, its shares now look cheap, trading at just under 10 times earnings. That’s considerably below its historic average of around 24. What’s more, the stock yields 5%, covered 1.8 times.
In the months to come, its share price may continue to suffer. However, in the long run, I think there’s potential for growth. As inflation and interest rates drop, this will no doubt benefit the stock. Yet I’m more excited by the potential of the business to capitalise on the growth forecasted in regions like Asia.
It’s widely known that the region has a rising middle class population. Over 50% of China’s population sits in the middle-class income group and that figure continues to grow. As spending on luxury goods begins to recover, Burberry is well-positioned to benefit.
This year, I plan to buy shares like Burberry. I’ll hold them for the times ahead and hopefully watch my pot grow.
