Many UK shares have rallied strongly over the past month. Since the end of October, for example, the FTSE 250 has added 14%.
However, some stocks have bucked the trend. They’ve slumped while the broader market has rallied.
In some cases, I think investors have overacted. With at least three coronavirus vaccines now in the pipeline, I believe the economy is set to roar back to life in 2021. As such, I’d use recent declines to snap up these investments while they’re trading at low levels.
UK shares on offer
The first company that’s appeared on my radar recently is magazine publisher Future (LSE: FUTR). Over the past few years, this organisation has developed a winning strategy in the magazine business. It’s been buying up numerous smaller publishers and then using its size to get costs down.
The firm has also been able to make the most of its internet real estate. Its specialist publications provide advertisers with niche audiences. In the ‘Wild West’ online advertising market, this gives the business an edge. Advertisers have been willing to pay a premium to get exposure to Future’s customers online. This initiative has pushed profits higher, making the group one of the best performing UK shares of recent years.
Management’s latest acquisition target is the comparison website Gocompare’s owner, GoCo Plc. The stock dropped on the news of the announcement, but considering Future’s track record of integrating acquisitions, I think this could be an excellent opportunity to buy this growth stock at a discount price.
If management can replicate the success the business has achieved in the past with previous acquisitions, I reckon Future can achieve large total returns for investors in the medium term.
Another one of the cheap UK shares that I’m currently eyeing up is James Fisher And Sons (LSE: FSJ). This business, which provides a range of services to the marine sector, has fallen out of favour with investors in 2020. It’s easy to understand why. Profits are expected to slump by 51% this year.
Nevertheless, it appears to me that much of this decline is already reflected in James Fisher’s share price. Since the beginning of 2020, the value of the company has declined by more than 50%.
Analysts are forecasting a rapid recovery in earnings next year. Growth of nearly 50% has been pencilled in for 2021. On this basis, it looks to me as if the market is focusing too much on the negative short-term new flow and not on James Fisher’s long term potential, which is the case with many other UK shares.
Therefore, I believe now could be an excellent time to add the stock to my portfolio. As the economy begins to recover in 2021, and the group’s earnings rebound, I reckon it’s likely the market will re-evaluate James Fisher’s prospects.
In my opinion, this combination of earnings growth and improved investor sentiment could help the stock outperform other UK shares.
Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Fisher (James) & Sons. 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.