I’ve got my eye on a number of UK shares right now and three of them have something in common. They’ve all been facing challenges recently, but I think they could be good long-term opportunities.
In a couple of cases, the businesses are showing signs of recovery but the stocks are still heavily discounted. The third’s riskier, but I’m looking to add to my existing investment.
Turnaround time
Shares in FTSE 100 distribution firm Bunzl crashed 25% in April when the company announced issues with its North American operations. But the latest update is much more encouraging.
Strategic changes are showing promising early signs and the firm’s expecting more in 2026. On top of this, the firm’s restarted the share buyback programme it suspended earlier this year.
Difficult trading environments in North America and Europe remain a risk. But with the stock 25% below where it was at the start of the year, I’m looking to add to my investment in the company.
FTSE 250 housebuilder Vistry is another company that’s been under recent pressure. A series of profit warnings connected to costing issues caused the stock to crash at the end of last year.
While these are set to weigh on profits for the next couple of years, an independent audit suggests the problem is in hand. And the firm’s business model gives it a unique strength going forward.
Vistry’s focus on partnerships means it has lower capital requirements than other builders, despite the risk of rising costs. That’s why I’m looking to buy the stock 53% cheaper than it was a year ago.
Just getting started
With both Bunzl and Vistry, the recovery seems to be underway. By contrast, WH Smith‘s (LSE:SMWH) a bit earlier in the process, having only recently crashed 42% in just a day.
The issue concerns the firm’s accounting for discounts and rebates from suppliers in its US division. And the firm has commissioned an audit to investigate more thoroughly.
It’s the right decision, but it’s virtually impossible for investors to know what that might uncover and it’s one of the major risks at the moment. But it’s not the only one.
The firm has quite a lot of debt, some of which – a £327m convertible bond issuance from 2021 – needs to be refinanced in 2026. With interest rates where they are, this could be expensive.
Even factoring in both the firm’s debt and its revised earnings however, I think the stock looks good value. And its focus on venues where competition’s limited sets it apart from other retailers.
This one clearly isn’t for the faint-hearted. But with the stock down 41% since the start of the year and the company’s competitive position still intact, I’m looking to add to my existing investment.
Investing in turnarounds
There’s no law that says every stock that goes down has to come back up again. And there are a number of UK shares that have fallen sharply that I’m staying well away from.
With Bunzl, Vistry, and WH Smith however, I’m optimistic. The underlying businesses look attractive to me and I think the falling share prices could turn out to be outstanding opportunities to consider.
