It’s definitely been a roller-coaster ride for investors so far this year. But stock market volatility has left some UK shares on tempting valuations. Here are two that I’m thinking about adding to my own portfolio and holding ‘forever’ (legend Warren Buffett’s favourite time horizon!).
This stock could recover strongly
Shares in Bloomsbury Publishing (LSE: BMY) have lagged the domestic-focused FTSE 250 index in 2025. But I don’t expect this sticky patch to last.
Back at the end of March (which feels like an awfully long time ago), the home of Harry Potter and other bestselling series stated that trading in FY25 had been “ahead of consensus expectations“. At the time, these expectations were that revenue would hit £333.4m and profit would come in at £39.6m.
As one might expect, the stock bounced a little on the news. However, they’re still significantly down on the 52-week high hit back in October 2024. If full-year numbers on 22 May prove to be even slightly better than anticipated, that gap could quickly narrow.
No sure thing
Naturally, no investment is devoid of risk. One snag here is that the shares still trade at a price-to-earnings (P/E) ratio of 16 — not exactly cheap for a stock in the Consumer Cyclicals space.
Most publishers also tend to depend on a few key authors to keep delivering the goods. Even if they do (and books might not break the bank in tricky times the way that other items do), many avid readers will probably be looking to hold back on spending where they can.
However, this a quality company. Margins have been climbing in recent years and the balance sheet is strong. A 2.7% forecast dividend yield, while not massive, looks set to be easily covered by profit.
On top of this, the acquisition of Rowman & Littlefield last year and the expansion of its Digital Resources division suggest Bloomsbury stock could still deliver for new investors like me.
Now oversold?
Drinks firm Diageo (LSE: DGE) has been an absolute horror show for holders recently. Shares in the owner of Johnnie Walker whiskey and Guinness have tumbled 18% in the last 12 months and now sit at a multi-year low. The reasons for this range from the impact of a cost-of-living crisis and health-conscious trends. Donald Trump’s threats on tariffs have only added to the toxic mix.
As poor as this form has been, we know that the market has a tendency to be too bullish on stocks during the good times and too harsh when their outlook is more uncertain. Does it make sense that a company which still boasts a bumper bunch of internationally-recognised brands, strong margins, and cash flow should be worth so much less in a few months? I’m not so sure.
Challenges ahead
To be clear, I’m not denying this FTSE 100 juggernaut has issues and a change of strategy is required. A worse-than-expected Q3 trading update, due to be served up on 19 May, could also put more pressure on the share price.
However, the current P/E of 17 is significantly below Diageo’s five-year average valuation of 23. That feels like a pretty large margin of safety. I think the 3.7% dividend yield also looks safe for now.
