3 heavily discounted UK shares to consider buying in May

These three UK shares have been beaten-down and Edward Sheldon believes they trade at very attractive valuations as we enter May.

| More on:
British flag, Big Ben, Houses of Parliament and British flag composition

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

While the FTSE 100 hit new all-time highs last month, not all UK shares have been rallying. Looking at the data, there are still a lot of stocks that are way off their highs.

Here, I’m going to highlight three discounted stocks that look interesting to me. I think investors should consider buying these big names in May.


First up is alcoholic beverages giant Diageo (LSE: DGE).

The owner of Johnnie Walker and many other well-known brands, this is a world-class company. And right now, the stock is on sale.

Yes, the group is facing a few challenges at present. In Latin America and the Caribbean, for example, sales have slowed.

However, I think these kinds of issues are reflected in the valuation.

Currently, Diageo’s price-to-earnings (P/E) ratio is 17.5. By contrast, rival Brown-Forman (which owns Jack Daniels) has a P/E ratio of 24.

Of course, we could see further pressure on sales in the near term. While interest rates are high we can’t rule out a consumer slowdown.

Taking a long-term view though, I reckon the shares should do well as consumers keep buying Diageo’s premium brands.

I will most likely add to my own holding here in the near future.


Next we have Whitbread (LSE: WTB), the owner of hotel chain Premier Inn.

This stock has taken a big hit this year. It seems investors are worried that budget travellers could be running out of money.

I reckon the share price fall has created an opportunity.

Looking ahead, I think affordable hotels are likely to remain in demand. One thing that could support demand is Taylor Swift’s Eras tour, which comes to the UK this summer. Last year, this provided a massive boost for hotels in the US.

It’s worth noting here that earlier this week, Whitbread hiked its full-year dividend by 26%. This suggests that management is very confident about the future.

The group’s lack of geographic diversification is a risk to consider. Premier Inn only operates in a few countries so it’s not as diversified as larger hotel operators like InterContinental Hotels (which I have shares in).

I believe the overall risk/reward proposition is attractive right now, however. With the shares currently trading on a forward-looking P/E ratio of 13.9, I like the set-up.

The Renewables Infrastructure Group

Finally, we have The Renewables Infrastructure Group (LSE: TRIG). This is an investment company that owns a portfolio of clean energy assets (wind and solar farms, etc).

This stock has been hit by higher interest rates. That’s because it has some debt on its balance sheet. Higher rates have also increased the appeal of safer investments such as bonds and cash savings.

I see scope for a rebound, however. Looking ahead, lower rates should provide a more favourable operating environment.

And in the long run, the company is well positioned to benefit from the clean energy boom.

It’s worth noting that management is targeting a dividend payment of 7.47p this year. That equates to a yield of around 7.6% at today’s share price.

This means investors are likely to be paid to wait for a rebound in the share price.

As always though, there are no guarantees – either with the share price or the dividends. If interest rates were to rise from here, the renewable energy stock could underperform.

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.

Edward Sheldon has positions in Diageo Plc and InterContinental Hotels Group Plc. The Motley Fool UK has recommended Diageo Plc and InterContinental Hotels Group 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.

More on Value Shares

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

What on earth’s going on with the Barclays share price?

The Barclays share price has skyrocketed in recent months, becoming one of the best-performing stocks on the FTSE 100 since…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

Analysts say this amazing FTSE 100 stock is a takeover target!

This FTSE 100 stock's one of the worst-performing companies on the index in 2024. So why might other companies want…

Read more »

Investing Articles

The FTSE 100 still looks cheap to me. But don’t just take my word for it!

The FTSE 100 (INDEXFTSE:UKX) has increased 7.5% since the start of 2024. But I think there’s evidence to suggest that…

Read more »

Investing Articles

What should the Vodafone share price be? Here are 3 possible answers

Our writer uses a number of popular financial measures to come up with an estimate of a fair value for…

Read more »

Young Woman Drives Car With Dog in Back Seat
Investing Articles

This unloved UK stock could rise 120%, according to a City broker

Some City analysts reckon a once-popular UK stock can recover from its massive recent decline and go on to more…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

Is Legal & General Group one of the FTSE 100’s greatest value shares?

Legal & General shares boast low P/E ratios and massive dividend yields. Could they be one of the London stock…

Read more »

A pastel colored growing graph with rising rocket.
Value Shares

These FTSE 250 shares are tipped to rise 14% to 18% in the next year!

Looking for the best FTSE 250 momentum shares to buy? Here are two that City analysts expect to soar in…

Read more »

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

Lloyds’ share price is up 20% in 3 months! How high can it go?

Lloyds’ share price has ripped higher recently. Here, Edward Sheldon provides his view on the level it could potentially climb…

Read more »