Undervalue Stocks To Buy – UK May 2018

Undervalued Stocks To Buy – UK May 2018

Introduction.

Back in December 2017, I notice that UK FTSE was undergoing a correction cycle on most non-cyclical despite the FTSE being stable. As of May 2018, I am confident to say that the UK equity markets have finally bottomed out and progressed to recovery mode since the middle of April 2018. Most shares have gained momentum and gone into bull recovery. So are there still any undervalued stocks to buy in the UK FTSE?  

The turnaround recovery was up to several reasons.

  • Bank of England determined to increase interest rates from the healthy economy.
  • Brexit breakthrough negotiation which sets a specific date for departure.
  • Trade wars between China and US concerns paving way for investors to look at undervalued stocks to buy in the UK.
  • Consumerism market looking healthier and consumers are starting to spend money again. High street retailers may be dropping but consumers are spending more money online to get better deals.

Yes, the boat has sailed....

In my point of view, the boat has sailed. The bottom barrel has passed and the trends is on the recovery upwards. Good value shares such as National Grid (<750), HSBC (<650), GSK (<1250), BAE (<550), RIO (<3500), FEVR (<2600), Unilever (<3700) have all sailed and returning to their normal PE level again. Note: the figure in brackets were the lowest share prices between December to February 2018.

There is still plenty of room for UK economy to grow and recover from the Brexit challenge. The market actually have not priced in the future value of life outside of EU yet. No one has a crystal ball to forecast what happens to UK and EU in the next 5 years. UK and EU are still classed as matured economic countries drawing more on social and political evolution. Unlike US and China whom are purely focusing their energy on economic growth.

Undervalue Stocks To Buy – UK May 2018

These two great companies are still under-valued.

From my Favourite short-list, there are 2 undervalued stocks to buy.

Legal & General (LGEN.L) under 280GBX

Legal and General is a company which is currently not valued as a breakthrough fintech company. A good future proof insurance company which appreciate and welcome financial technology (fintech). This will reduce risk of any future disruptive companies rocking the business model. Legal and General is safer and more stable stock to invest for dividend and value growth compared to higher risk sectors like Oil&Gas, Retail or communication companies.

  • Recently bought out a high quality Home building company called CALA HOME. High profit margin company for middle class families.
  • PE Ratio of under 13 with Dividends of over 5.5%
  • Expected dividend growth between 5-15% yearly with a healthy dividend cover
  • Provides good quality insurances directly to consumers. Honest transparent value.
  • Provides good quality low cost funds and index for investing customers.
  • Investing in FinTech companies like SALARYFINANCE and SMART PENSION

Reckitt Benckinser (RB.L) under 6000GBX

Currently Reckitt Benckiser are not in investors pet-list after missing profit expectation for the last two quarters. Mostly blame on the high cost and lack of growth. The company is currently focusing on future growth as they have accepted that business stagnating over the last 18 months. Personal investor needs to focus on their long term value and quality of the company rather than reading on their negative outcome from the internet. Large firm investors are always looking for targeted return in a shorter period of time such as high growth technology companies. As personal investors we must ask ourselves why avoid companies with high quality household products? Unless we stop cleaning and have unprotected sex, I do not see how Reckitt Benckinser sales will degrade lower. At its current fair valued price, I am not surprise if a Chinese cash rich company or Warren Buffett Kraft Heinz buys out this great British company.

  • They own DUREX, DETTOL, NUROFEN, SCHOLL and Gaviscon. All these are in most household.
  • They bought Mead Johnson who owns Enfamil infant formula on Feb 2017.
  • A Fair dividend of 2.8% and PE Ratio of 18 at 5800GBX
  • At peak RB was almost at 8000gbx.

Who should buy these two shares?

  • DO NOT BUY if you are expecting multiple growth in the next 2-5 years.
  • BUY NOW if you are seeking more cyclical companies in your shares portfolio.
  • BUY NOW if you have a generous sum of more than £5,000 to invest and looking for yearly dividends reinvestment returns.
  • BUY NOW if you are investing for your child for the next decade to fund their educations.
  • BUY NOW if you need more UK exposure diversity in your portfolio.

Final Words.

RB @ 5700GBX and LGEN @ 270GBX are two excellent companies which are undervalued stocks to buy. The UK economy have started recovering and whilst these two companies share prices value have not been reflected yet. I personally have invested in these two great companies for long term growth.

From,

Dr Alex Koh
Founder and CEO of MooMooCoo.com
Family Finance Made Simple

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