Falling prices usually mean that investors think buying is a bad idea. For those who can see past short-term challenges, though, the rewards for being brave can be enormous.

The risks and rewards of buying low

As an illustration, consider Meta Platforms. The stock was trading at around $120 at the end of 2022, implying a price-to-earnings (P/E) ratio of around 13. 

That’s clearly unusually cheap, but the firm was facing genuine challenges. For one thing, it was losing significant amounts of money in its metaverse operations. 

On top of this, Apple’s privacy changes were set to put pressure on its advertising business.  But for investors who were prepared to be brave, the stock has been a great investment.

Not every stock that’s down is a buy – take Peloton for example. Between January 2021 and December 2022, the stock fell 95%, but investors who bought the dip haven’t done well at all.

Revenues have kept falling and the company continues to lose money. As a result, the share price has fallen another 20% since the start of 2023.

Buying stocks that have been falling can therefore generate spectacular results, but success isn’t guaranteed. In a few cases, though, I think the risk is worth the potential returns.

An out-of-favour growth stock

Shares in Macfarlane Group (LSE:MACF) have fallen 37% in the last six months. But I think the stock looks more like the next Meta Platforms than the next Peloton.

It’s been a challenging year for the packaging company with inflationary pressures squeezing margins and also weighing on demand. But the big issue has been more recent. 

A tragic death at one of its factories caused operations to halt (obviously). An investigation is going on and uncertainty around the outcome means there’s risk for investors. 

My sense, though, is that the stock market is overreacting. And I think the current share price offers a margin of safety for investors looking for stocks to consider buying.

In my view, the real highlight of Macfarlane’s business is its manufacturing division. This uses specialist technical knowledge to create bespoke packaging for high-value products. 

The margins are impressive and the unit generates around £65m in revenues. I think that by itself is enough to justify the £100m enterprise value the stock currently trades at. 

Being brave

In the stock market, there are always companies that are out of favour with investors. The key is figuring out which ones are opportunities and which ones aren’t. 

I think there are plenty of both at the moment. Macfarlane is one I’ve been buying for my portfolio recently, but it’s not the only name on my list right now.

Over the long term, the stock market has generated good results for investors. But the best results have tended to come from buying shares when other investors don’t want to.

The post The best time to buy stocks is when they’re cheap. Here’s 1 from my list appeared first on The Motley Fool UK.

I’m convinced that all three are good value at the moment, but I’m not sure how much longer they’re going to stay that way. So I’ve bought the trio within in the last week.

JD Wetherspoon

The market keeps thinking JD Wetherspoon (LSE:JDW) is set to put up a bad earnings report, but it hasn’t happened. As a result, the stock trades at a price-to-earnings (P/E) ratio of 11. 

A number of hospitality venues have been closing down since the last Budget. But this has been a good thing for the firm – each time it happens, a competitor disappears. 

JD Wetherspoon relies on volume to provide its lower costs. So a potential downturn in consumer spending could be a big problem for the company’s margins and profitability. 

Right now though, I’m seeing like-for-like sales growth in an industry that’s in trouble. That’s very positive for the firm’s competitive position, so I’m buying before the market notices.

Gamma Communications

With Gamma Communications (LSE:GAMA) it’s the customer base I think are missing something. The company’s a provider of cloud-based business communication systems.

UK organisations have until January 2027 to move their systems before the copper network is switched off. But a large number of companies either haven’t realised or are delaying.

That’s led to some pretty uninspiring recent results from the firm. And the risk, of course, is that the date of the switch off might be pushed back, removing the need for urgency. 

One way of another though, I think the big move for the business is coming sooner or later. So I’m looking to buy the stock while it’s down 59% from the record highs achieved in 2021.

Macfarlane

Macfarlane (LSE:MACF) shares recently crashed 20% in a day after the packaging firm issued a profit warning. A fatality at one of its Pitreavie factories has brought operations to a halt.

An investigation is ongoing and there are open questions about potential future liabilities and customer retention, which presents a risk. But I think investors are missing something here. 

The packaging company only acquired Pitreavie recently and £4m of the deal still depends on future earnings growth. And that’s much less likely to be triggered as a result of the accident.

Given this, I think the market’s overestimating the effect of the awful fatality on Macfarlane’s business. It’s a stock I already owned in my portfolio, but I’ve been adding to my investment.

Investment opportunities

Being greedy when others are fearful inevitably involves looking to buy stocks at times when other people think they look risky. And this isn’t always easy. 

I think however, there are a few cases where investors are overestimating the risks with specific UK stocks. So I’m looking to take advantage of this. 

With JD Wetherspoon, Gamma Communications and Macfarlane, the risks are genuine. But I don’t think the market’s pricing them correctly and this is why I’ve been buying.

The post 3 stocks I’m not waiting to buy — the window could be closing fast appeared first on The Motley Fool UK.

The move followed the sad news of the death of a worker in one of its factories and ongoing difficulties in its distribution business. But what should I make of it as an investor?

Tragedy

A 57-year-old worker having a fatal accident in a packaging factory is a tragedy. The full details aren’t yet clear and there’s going to be an investigation, but there’s no other word for it. 

Operations at the facility were – obviously – suspended and Macfarlane is going to spend the rest of 2025 looking to stabilise that business. And that’s going to have a big impact on profits.

That’s a big part of why the stock has crashed. It might bounce back when things stabilise, but it would be cynical to look for an investment opportunity in that way right now.

There is, however, more to the story than just this. Macfarlane’s distribution business has been having a tough year and that’s something investors should be paying attention to.

Distribution

Around 85% of Macfarlane’s revenues come from its distribution business. This supplies cardboard boxes and the like to the e-commerce industry. 

The company has been dealing with cost pressures and a difficult pricing environment in this part of its business for some time.

A series of acquisitions has given Macfarlane a broader presence across the UK, which helps a bit. Ultimately though, this isn’t a part of the firm of which I have a particularly positive view. 

Given the UK’s energy prices and the recent pressures businesses have been facing, I think investors are right to being wary. But there’s something else I’m much more optimistic about.

Manufacturing

As well as distributing cardboard boxes, Macfarlane also manufactures bespoke products for shipping specific items. These are high-value and difficult to transport without breaking. 

Unlike the distribution business, there’s a lot of competitive strength here. Its solutions are highly technical and involve working closely with customers, create lasting relationships. 

As a result, margins are much higher. So despite the manufacturing business contributing 15% of Macfarlane’s revenues, it accounts for more than 25% of the firm’s operating income. 

The customised solutions cost a fraction of the replacement value of the products they protect, but they’re critically important. And I think that’s a very good position to be in. 

Long-term thinking

The tragedy at Macfarlane’s factory isn’t something investors should just ignore. Nor is it something they should look to use as a potential short-term opportunity. 

I think, however, there’s a lot of long-term strength in the firm’s manufacturing business that’s being masked by current difficulties in distribution. And that’s worth taking seriously. 

At today’s prices, I think the stock looks like a bargain. So if it’s still trading at these levels when I’m next in a position to buy, I’ll be looking to add to my investment.

The post Down 19% in a day! Should I buy or sell this UK stock? appeared first on The Motley Fool UK.

Source: JP Morgan Guide to the Markets UK Q4 2025

Until recently, that hasn’t been much use to investors – UK shares have been relatively cheap, but there hasn’t been any sign that the gap might be set to close. That, however, might be changing. 

Growth

By themselves, valuations generally aren’t what cause share prices to move. It’s a cliché that the stock market can stay irrational for longer than investors can stay solvent – but it is true.

In general, investors need something to bring their attention to cases where equities are trading below where they should be. And earnings growth is often a good candidate for that role. 

Source: JP Morgan Guide to the Markets UK Q4 2025

Given this, I think there’s cause for optimism about the outlook for UK shares. According to data from JP Morgan, analysts are expecting UK companies to grow earnings substantially in 2026. 

In fact, despite a significant gap in valuations, there isn’t much difference in growth expectations on either side of the Atlantic. And I think that’s a big reason to be bullish on UK stocks.

Packaging

One company that could use an earnings boost is Macfarlane Group (LSE:MACF). The firm both manufactures and distributes packaging to companies. 

Earnings have been falling this year, especially on the distribution side of the company. There are a few reasons profits are down, including increased costs and a tough environment for businesses.

A big part of this is energy costs, which are an ongoing concern. The UK’s high electricity prices can weigh on demand for products – and the packages they’re shipped in.

Macfarlane isn’t in a position to do anything about this directly. But it can focus on building a strong competitive position for the long term and it’s been doing a good job of this recently.

Opportunity

I think the most interesting part of Macfarlane’s business is its manufacturing division. This focuses on packaging for items that are difficult to ship and have high replacement costs. 

The firm benefits from strong technical expertise and close customer relationships and this creates a barrier to entry for competitors. And this is a key long-term advantage. 

At a price-to-earnings (P/E) ratio of 14, the current share price doesn’t really reflect much in the way of growth. So if things pick up in the UK, I think the stock could do very well. 

In the meantime, the 4% dividend yield is well-covered by free cash flows. And the company is actively using its excess capital to reduce its share count through buybacks. 

Outlook

UK stocks have underperformed their US counterparts for some time. The main reason for this is that earnings growth has been stronger across the Atlantic, but this might be about to change.

Analysts are forecasting a significant lift in UK growth in 2026. And if this happens, I think the current low valuations means there’s a decent chance share prices might follow. 

At today’s prices, I think Macfarlane is worth a look. It trades at a relatively low P/E multiple and if earnings pick up across the board, I expect the company to be in the action.

The post 1 big reason to be bullish on UK stocks appeared first on The Motley Fool UK.

That’s definitely the case with Macfarlane (LSE:MACF) – the firm announced a 10% decline in operating profits and the stock fell 15% as a result. But I’m seeing this as an opportunity.

Profit warning

Macfarlane manufactures and distributes packaging products. And its distribution business – which accounts for 85% of sales and 74% of operating profits – has been under pressure recently.

The firm reported increased caution from customers in terms of new orders, as well as pressure on margins as a result of increased competition and higher costs. That’s not a good combination.

The problem is the company’s distribution focuses on cardboard packaging for the e-commerce industry, which is largely undifferentiated. That leaves it open to the kind of challenges it’s facing.

The manufacturing unit – which makes up 15% of sales and 26% of profits – is doing much better. Tariff uncertainty aside, management reported strong momentum from the unit.

To my mind, that’s not a big surprise. This part of Macfarlane’s business focuses on products that are much more bespoke, technical, and add significant value for customers. 

As a result, margins in this division tend to be much higher. It’s also no surprise to me to see it faring much better in a difficult economic environment. 

Opportunity?

Before the latest news, Macfarlane shares were trading at a price-to-earnings (P/E) ratio of 12. That’s about where the stock has been trading on average over the last five years.

The share price has fallen 15%, which is roughly what I expect a 10% drop in operating income to mean for earnings per share. So I think the P/E ratio is essentially unchanged.

Given this, I think any positive signs from the business in future could very well move the stock higher. And there are reasons to believe some of the recent challenges are likely to be temporary.

Regardless of the macroeconomic environment, customers are likely only able to delay their orders for so long. So I expect demand to return sooner or later and sales to grow when it does.

There’s also an ongoing share buyback programme, which management has stated it intends to continue. And at a lower price, the effect on the number of shares outstanding should be greater. 

Over the long term, I also expect strength in Macfarlane’s manufacturing firm to offset short-term weakness in its distribution business. So I see a drop in the share price as an opportunity.

Manufacturing stocks

It’s an occupational hazard with this type of company that inflation can push up costs and slow sales at the same time. This is especially true with businesses that lack differentiated products.

That’s the situation with Macfarlane’s distribution business at the moment. But the thing I find attractive about the company is – and always has been – its manufacturing division.

It’s the smaller part of the business, but I think there’s a lot to like about it. And the opportunity to buy the stock at a 15% discount is one I’m looking to take advantage of.

The post Down 15% in a day, is this my chance to buy shares in this UK small cap? appeared first on The Motley Fool UK.

Buying small caps that trade on lower price-to-earnings (P/E) ratios can greatly reduce the danger. With low valuations, it can be argued that their higher risk profiles are baked into the share price, potentially limiting price falls on disappointing company-, industry-, or economic-related news.

With this in mind, here are two top UK shares that demand serious attention at current prices.

Macfarlane Group

As a major packaging supplier, Macfarlane Group (LSE:MACF) has serious long-term growth potential as online shopping continues to grow.

The business doesn’t just produce bog-standard cardboard boxes. It supplies tailored packaging solutions for different clients, requiring a level of technical expertise that allows it to succeed in what’s a highly competitive market.

According to its website, the small cap’s processes include “utilising 3D design software and rigorous application testing methods” to ensure than high value products are well protected. This builds a level of trust in markets like electronics, aerospace, and healthcare that helps it to continue winning business.

City analysts expect Macfarlane’s annual earnings per share (EPS) to rise 24% in 2025, speeding up from 3% last year. This leaves the company trading on a rock-bottom forward P/E ratio, of 9.4 times.

However, this isn’t the only impressive value metric it currently enjoys.

That rapid surge in profits that’s predicted also means Macfarlane trades on a corresponding P/E-to-growth (PEG) multiple of 0.4. Any reading below one implies that a stock is undervalued.

As I say, Macfarlane does face significant competitive pressures that threaten sales and margins. Its operations are also highly cyclical. But at current prices I still think it’s worth serious consideration.

Topps Tiles

I believe this is also the case with Topps Tiles (LSE:TPT), whose profits can fall sharply during economic downturns. However, as a long-term investor there’s a lot I like here, and particularly its earnings prospects as the UK housing market improves.

Commanding around a fifth of the domestic tile market, the retailer’s well placed profit from this opportunity. Indeed, it’s also investing heavily to enhance its product ranges and boost its digital channel, a plan it thinks could add £100m to its sales column over the medium term.

Topps Tiles’ P/E ratio for this financial year (to September) is good if not spectacular. This comes in at 11.5 times.

But like Macfarlane, the business is tipped to deliver breakneck EPS growth over the short term. Annual rises of 40% and 43% are predicted for the next two financial years respectively, and so that earnings ratio plummets to 8.1 times for next year.

These impressive projections also result in more sub-1 PEG ratios (at 0.3 for 2025 and 0.2 for 2026).

With Topps shares also offering a 6% dividend yield for this year and 8% for next, it offers exceptional all-round value. Both of these small caps deserve serious consideration in my opinion.

The post 2 small-cap stocks with low P/E and PEG ratios! appeared first on The Motley Fool UK.

Some of them have worked out better than others. And there are three in particular that are now a lot cheaper than they were when I started buying them. 

Bunzl

Bunz’s (LSE:BNZL) a FTSE 100 distribution company that I’ve admired it for some time. But I finally got around to buying it earlier this year… and almost immediately, it crashed 25%.

After a disappointing trading update, especially from the US, the company announced it was halting its ongoing share buyback programme. And there’s no set timeline for its resumption.

Given this, there’s no way to avoid the fact the macroeconomic situation in the US isn’t a risk and this makes buying difficult. But I think waiting might – quite literally – pay dividends. 

Bunzl has an outstanding record of dividend growth and I don’t think there’s an imminent threat on this front. And the firm also has some important long-term strengths. 

The FTSE 100 company has a huge scale advantage over its competitors and this is important for two reasons. The first is it means it can deliver products faster, cheaper, and more reliably.

It also creates opportunities for acquisitions. In general, a more fragmented market means Bunzl can buy other businesses and add them to its network without risking its balance sheet.

That big advantage is still intact and I think the challenges the company’s facing are temporary. So I’m going to stick with my investment and see what happens.

Macfarlane

In terms of size, Macfarlane‘s (LSE:MACF) at the other end of the scale. The packaging firm is up against some bigger competitors and there’s a risk this can put it at a disadvantage. 

It’s tough to compete with larger companies when it comes to supplying cardboard boxes. But while the firm does do this, I think the other part of its business is much more interesting.

Macfarlane’s manufacturing division creates bespoke solutions for products that are unusually valuable or difficult to transport. And this is something I find very attractive.

Competing in this area is much more difficult. It isn’t just about being able to churn out boxes at scale – there’s complicated technical knowledge needed about different materials.

On top of this, I think demand should be relatively resilient. When the cost of replacing a product is high, it makes a lot more sense for customers to pay to reduce this risk.

Macfarlane’s share price has fallen around 10% since the start of the year. But I think there’s an opportunity for me to add to my investment at today’s prices. 

Buying opportunities

Falling share prices can be great opportunities for investors. Unless something significant changes with the underlying business, buying at a discount can be a very good idea.

I think this is the case with both Bunzl and Macfarlane at the moment. But in the context of my own portfolio, it’s the packaging firm that I’m looking to prioritise for now.

The post As these UK stocks fall, should I keep buying? appeared first on The Motley Fool UK.

Investors have been moving away from US shares and into other assets – including cash and UK stocks. And I’ve been looking for opportunities ahead of a potential FTSE 100 bull market.

Fund flows

The results of Bank of America’s monthly fund manager survey for March generated some interesting data. The headline is that US stocks have been declining in popularity.

Participants reported moving from being 17% overweight US shares in February to being 23% underweight in March. That’s interesting, but there was something else that caught my eye.

Rather than where the money’s been taken from, I’m interested in where it’s been going to. And along with European equities, emerging markets, and cash, the answer’s UK stocks.

During March, investors went from being 18% underweight UK stocks to 4% overweight. And I think that’s a significant indication of improving sentiment. 

Valuation

Investing though, isn’t about being in front of the latest stock market trend. It’s about finding situations where a share price doesn’t reflect the value of the underlying business.

This involves looking for situations where the market’s underestimating a company. And the chances of this are best in markets where investors have a less positive outlook.

Despite the activity, UK shares still trade at a discount to their US counterparts. The S&P 500 trades at a price-to-earnings (P/E) ratio of 27, compared with 17 for the FTSE 100.

By itself, this doesn’t say anything about value. But it’s a sign investors still think US shares have better prospects, which is why I’m still mostly focusing on the UK for stocks to buy. 

Packaging

Macfarlane (LSE:MACF) is a manufacturer and distributor of specialist protective packaging. And I think it’s a strong business with shares trading at a relatively attractive price.

The firm doesn’t have the advantages of scale of other packaging companies and this creates risk. But its distribution business isn’t what makes it attractive from an investment perspective.

Macfarlane’s manufacturing division focuses on specialised markets like aerospace, medical devices, and automotive parts. These are often expensive and breakages can be costly.

This means designing and engineering bespoke protective packaging for these products can be highly lucrative. And a strong position in this industry is the big attraction of Macfarlane.

I’m buying

Regardless of whether or not investors are shifting from US equities to UK stocks, I think Macfarlane shares look good value. That’s why I’ve been buying them for my portfolio.

Revenues and profits fell slightly in 2024, due to a tough trading environment. That’s an ongoing risk to consider, but I think there are some important long-term strengths.

As the company expands, its operating margins have grown consistently over the last 10 years. And I think there could be more to come, making the stock attractive at today’s prices.

The post A bull market could be coming for UK stocks! Here’s what I’m buying appeared first on The Motley Fool UK.

Not having to worry about capital gains taxes is very valuable for building wealth. And avoiding taxes on dividends is great for when the time comes to use a portfolio to generate income.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Retirement income

According to the Pensions and Lifetime Savings Association (PLSA), a couple in the UK needs a combined income of £43,100 per year to retire comfortably. For a single person, it’s £31,300.

Achieving either of those figures from a Stocks and Shares ISA isn’t easy. With where the stock market is right now, I think a diversified portfolio might generate around 5% per year.

That means around £626,000 in investments is what it would take for a single person to retire and live comfortably today. But the contribution limit each year for an ISA is £20,000.

Opening a Stocks and Shares ISA and immediately earning enough to retire comfortably is unrealistic (without transferring another ISA). But there are reasons for investors to be positive.

Compounding

That seems fairly gloomy, but there are reasons for optimism. The most obvious is that the cash someone invests can earn a return each year and bring the target closer. 

Investing £20,000 per year – which isn’t to be taken lightly – at an average of 5% per year results in a portfolio worth £626,000 within 20 years. That could shorten the time to retirement considerably.

There is, however, a catch. Inflation is a constant risk and as the cost of living keeps going up, the amount needed to retire comfortably in the future may well be higher than it is now. 

Despite this, a Stocks and Shares ISA can still be a powerful asset for someone looking to retire early. But the obvious question is what they consider investing in to try and reach that goal.

An under-the-radar opportunity?

One stock that probably doesn’t get the attention it deserves is Macfarlane (LSE:MACF). This might be because it’s a packaging firm and even I can’t pretend cardboard boxes are interesting.

Given this, investors might be surprised to find the market is actually relatively crowded. And the company is up against some much bigger competitors, which creates a risk.

Macfarlane, however, finds its niche in more bespoke packaging solutions for objects that are fragile or valuable. And this creates much higher barriers to entry for potential competitors. 

Technical knowledge about materials and close relationships with its customers are advantages other companies don’t have. And these have resulted in growing margins over the last 10 years.

Dividend growth

Right now, shares in Macfarlane come with a dividend 3.5% yield. And the company recently announced an increase in its shareholder distribution, which I think is encouraging.

I’d like to reach retirement before I get to the State Pension Age in 2056. But there’s a long way to go until that’s realistic for me.

Shares like Macfarlane, though, are what I want to be invested in as I try to get there. And the tax advantages of a Stocks and Shares ISA could help me along even more.

The post How much does an investor need in a Stocks and Shares ISA to retire comfortably? appeared first on The Motley Fool UK.

The big question is which stock (or stocks) should I buy? I’m in a position to make something a meaningful part of my portfolio, but I’m finding it hard to decide between a few options.

Admiral

From the FTSE 100, I like Admiral (LSE:ADM) very much. It operates in an industry that isn’t discretionary – people need car insurance – and consistently outperforms its competitors.

On top of this, its policy of reinsuring most of its risk means the company is able to return a lot of cash to shareholders via dividends. This is another attractive feature of the business.

One thing to keep an eye on with Admiral is inflation. Used cars and repairs becoming more expensive is the kind of thing that can cut into margins, despite its strong competitive position.

The stock got to my price target – which is £25 – earlier this year, but I wasn’t in a position to buy then. So I’m now wondering whether I need to be patient with this one. 

Macfarlane

Another stock I’ve got my eye on is Macfarlane (LSE:MACF). With a market-cap of £172m, this is a much smaller business, but it’s one that I think has a lot of attractive features.

The company specialises in packaging products. Obviously, this is an industry with a lot of bigger competitors and this is something of a risk, especially for basic things like boxes.

Importantly though, not all packaging is like this. With healthcare products, there are certain technical requirements to meet and particular standards, creating a barrier to entry. 

The stock is actually trading well below my estimate of its intrinsic value at the moment. So it’s definitely one that I’m considering for my ISA. 

Polaris

Over in the US, I’ve got an eye on Polaris (NYSE:PII) shares. The company is one of the world’s top manufacturers of recreational vehicles (RVs), such as snowmobiles, boats, and motorcycles. 

The stock is down quite a bit recently, which is largely due to US interest rates. With a lot of the firm’s sales financed through borrowing, the possibility of rates remaining high is a risk.  

This, however, is a risk across the industry. And I think it’s one that Polaris – by virtue of the strength of its brands and its distribution network is better placed to deal with than its rivals.

As a result, I expect the company to cope with a difficult trading environment better than most. And with the stock at an unusually low price, this could be my opportunity.

Opportunities

Warren Buffett and the team at Berkshire Hathaway might be backing away from shares at the moment. But I’m not looking to build a cash position of my own. 

I’m in the unusual position of having cash available and seeing a range of opportunities, both in the UK and the US. I’m still figuring out what to do, but I’m expecting to act soon.

The post What should I buy next in my Stocks and Shares ISA? appeared first on The Motley Fool UK.