For many years, UK shares have lagged their US counterparts when it comes to valuation. Individual shares may have bucked the trend, but at a broad level the US market has looked more pricey. That remains the case.
However, many UK shares have seen their valuations increase over recent years. Just look at the blue-chip FTSE 100 index. It has moved up by 52% over the past five years. So might there still be value to be found among UK shares in today’s market?
Not trying to time the market
My answer is that yes, I think there could well be value in the UK market today.
For now, I have no plans to buy into the FTSE 100 overall, for example by investing in an index tracker. But what I have been doing in 2025 is buying individual UK shares I think are undervalued. I continue to hunt for what I see as potential bargains.
I am not trying to time the point when the FTSE 100 starts to fall. That will happen sooner or later, though nobody knows when. Instead, I am looking for individual bargains.
When is a bargain not a bargain?
The challenge though, is that for every share someone buys, someone on the other side of the transaction is selling it. In other words, what looks like a bargain to me may in fact turn out to be a value trap.
WPP and B&M European Value Retail are two examples of shares I have bought this year in the hope that they offer long-term value. Both have disappointed the market with profit warnings. B&M is down 53% so far in 2025, while WPP has performed even worse, shedding 64% of its value since the turn of the year.
I see them as being in different situations. B&M has been struggling to prove its relevance in a discount retail market that ought to benefit from resilient customer demand. By contrast, WPP’s problem is not just with its own performance but with the impact of artificial intelligence (AI) on its industry as a whole.
What both shares have in common is that, while my purchase price could yet turn out to be a long-term bargain, it might also be a value trap.
Looking for a margin of safety
I feel a bit more confident about another company that warned on profits earlier this year: Greggs (LSE: GRG). Again, perhaps my confidence is misplaced. Misjudging consumer demand when the summer began warmer than expected seems like a pretty basic error for the retailer to make. I therefore perceive a risk that poor demand planning could cause more problems in future.
But, like B&M, I think Greggs benefits from a market that is both huge and set to remain that way. People need to eat and the baker’s modestly-priced products have legions of fans.
I also like the margin of safety I think Greggs’ unique proposition gives the company.
There are other bakers and purveyors of cheap food. But Greggs has carved a unique identity when it comes to cheap and convenient savoury snacks, meals and sweet treats.
From a long-term perspective, it is one of the UK shares I think merits a much higher price than it currently has. I have no plans to sell.
