Finding the best shares to buy ahead of a market correction is an excellent strategy to supercharging portfolio returns. After all, investors who already know where to allocate capital when attractive prices emerge can stay two steps ahead of the crowd.
Incoming volatility?
UK stocks have enjoyed some tremendous returns so far in 2025. But with some businesses approaching all-time highs, their valuations could be getting a little stretched. And if brewing macro uncertainty evolves into an economic slowdown, recent gains could be undone, sparking fresh volatility.
This is especially true when hopping across the pond to the US markets, where valuations are even higher, especially within the tech sector.
The stock market will eventually throw another tantrum at some point. It could be before the end of 2025 or several years away from now. Nevertheless, being ready for the worst-case scenario can make a huge difference when chaos eventually materialises. And the three best tactics to prepare are:
- Ensure a portfolio is diversified across multiple industries and geographies.
- Build a robust cash position providing the flexibility to capitalise on opportunities.
- Have a watchlist of top-tier businesses that would make fantastic investments at an attractive price.
Finding opportunities
For investors seeking to build wealth, some of the best shares to buy are often the ones that have previous outperformed, not because of hype but rather significant fundamental improvement. And one potential example of this could be Rolls-Royce (LSE:RR.).
The once-struggling engineering giant has been transformed into a highly cash-generative and profitable enterprise in just a few short years.
It’s now seemingly perfectly positioned to capitalise on the incoming tailwinds of rising global passenger volumes in its civil aerospace segment, secure critical military contracts as Europe ramps up its defence spending, and potentially lead the charge in the nuclear energy revolution.
The combination of a promising outlook with vastly improved financials has pushed its share price up more than 1,100% since 2020, making it one of the top-performing FTSE 100 stocks so far this decade.
But this has also translated into a premium valuation with the forward price-to-earnings ratio sitting near 42. As such, if a market correction does emerge, the stock could suffer a significant tumble, creating a window of opportunity to buy shares at a more attractive price.
Balancing risk with reward
Even at a better price, Rolls-Royce isn’t guaranteed to live up to long-term expectations. Escalating trade disputes and geopolitical conflicts could cripple supply chains, making growth far more challenging, even as the wider stock market recovers from a future crash.
There’s also the lingering question of execution risk. While Rolls-Royce has secured several notable new contracts, most of the gains made in recent years have largely been driven by internal efficiency investments and restructuring.
This process is largely finished. And with the ‘easy’ wins already under its belt, CEO Tufan Erginbilgiç could have a harder time maintaining momentum in an increasingly competitive landscape.
In other words, just because Rolls-Royce has done well in the past, it doesn’t mean it will continue to do so. But with a knack for defying expectations, that’s a risk I’d be willing to take if the shares become cheaper.
