In this article, we discuss the 10 best undervalued UK stocks to buy now.
The onset of Covid-19 resulted in the global market crash, which paved way for many stocks to lose their intrinsic value. Where it was worrisome for the companies, many investors took it as an opportunity invest in undervalued stocks to reap long-term profits.
Investing in undervalued stocks is not a new practice. This strategy is used by many legendary investors who wish to diversify their portfolios with these investments. Warren Buffett is one of the most famous value investors of our times. Some of the notable value stocks in Buffett’s portfolio include Bank of America Corporation (NYSE:BAC), The Kraft Heinz Company (NASDAQ:KHC), and DaVita Inc. (NYSE:DVA).
Our Methodology:
Let’s analyze our list of the best undervalued UK stocks to buy now. The stocks mentioned below are the companies that are mainly traded on the London Stock Exchange, hence the majority of these stocks don’t have hedge fund positions. We picked some of the most notable undervalued UK stocks that have attractive P/E ratios.
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10 Best Undervalued UK Stocks to Invest In
10. Aviva plc (LSE:AV.L)
P/E Ratio: 9.09
Aviva plc (LSE:AV.L) ranks tenth on our list of the best undervalued UK stocks to buy now. This September, Barclays lifted its price target on Aviva plc (LSE:AV.L) to GBX 505, while keeping an ‘Overweight’ rating on the shares. The firm’s analyst noted the company’s growth potential and believes that it is well-positioned to benefit from the growing insurance industry in the UK.
Aviva plc (LSE:AV.L) is a British multinational insurance company that provides services in savings, retirement, and insurance. In 2020, Aviva plc (LSE:AV.L) shares slumped, reaching their all-time low at GBX 231, due to the global market clampdown. Due to this, the company also had to cut its dividend payment. However, it bounced back in 2021. Currently, Aviva plc (LSE:AV.L) pays an annual dividend of GBX 21 per share, yielding 5.20%.
Aviva plc (LSE:AV.L) is currently traded at a trailing twelve months P/E ratio of 9.09. Since the beginning of the year, the stock delivered a 22.55% return to shareholders, while it gained 39.4% in the past year.
Aviva plc (LSE:AV.L) is one of the notable stocks in 2021 like Bank of America Corporation (NYSE:BAC), The Kraft Heinz Company (NASDAQ:KHC), DaVita Inc. (NYSE:DVA), Berkshire Hathaway Inc. (NYSE:BRK-B), and Amazon.com, Inc. (NASDAQ:AMZN).
9. British American Tobacco p.l.c. (NYSE:BTI)
Number of Hedge Fund Holders: 12
P/E Ratio: 9.69
Despite some speculations surrounding the decline of the tobacco industry in the UK, British American Tobacco p.l.c. (NYSE:BTI) generated £12.8 billion in revenue in the first half of 2021, beating the estimates by £40 million. The company’s EPS of £1.58 also beat the consensus by £0.01. It ranks ninth on our list of the best undervalued UK stocks to buy now.
British American Tobacco p.l.c. (NYSE:BTI) is a British cigarette manufacturing company that deals in nicotine products, along with cigarettes and tobacco. Orbis Investment Management is the company’s leading shareholder, with over 19.3 million shares, worth $759 million. In addition to this, 12 hedge funds tracked by Insider Monkey have positions in British American Tobacco p.l.c. (NYSE:BTI), compared with 14 in the previous quarter. These stakes are valued at over $1 billion.
This August, Morgan Stanley lifted its price target on British American Tobacco p.l.c. (NYSE:BTI) to £3,210, with an Overweight rating on the shares, highlighting the company’s staple products amid growing consumer demand. The company pays an annual dividend of £2.12 per share, yielding 0.08%. British American Tobacco p.l.c. (NYSE:BTI) has a trailing-twelve-month P/E ratio of 9.69.
In addition to Bank of America Corporation (NYSE:BAC), The Kraft Heinz Company (NASDAQ:KHC), DaVita Inc. (NYSE:DVA), Berkshire Hathaway Inc. (NYSE:BRK-B), and Amazon.com, Inc. (NASDAQ:AMZN), analysts and investors are also paying attention to British American Tobacco p.l.c. (NYSE:BTI) amid the company’s long-term growth potential.
8. Redrow plc (LSE:RDW.L)
Number of Hedge Fund Holders: N/A
P/E Ratio: 9.11
Redrow plc (LSE:RDW.L) is currently traded at GBX 668.80, after hitting a low of GBX 313.2 due to the pandemic-related global market crash in March 2020. The stock gained 45.3% in the past year, while its year-to-date returns stood at 21.7%. The company stands eighth on our list of the best undervalued UK stocks to buy now.
Redrow plc (LSE:RDW.L), one of the greatest homebuilders in the UK, pays an annual dividend of GBX 0.06 per share, yielding 0.01%. This August, Berenberg lifted its price target on Redrow plc (LSE:RDW.L) to GBX 820, with a Buy rating on the shares, highlighting the UK’s government announcement for supporting the housing market.
Redrow plc (LSE:RDW.L) has a trailing-twelve-month P/E ratio of 9.11.
7. Legal & General Group Plc (LSE:LGEN.L)
Number of Hedge Fund Holders: N/A
P/E Ratio: 9.11
Legal & General Group Plc (LSE:LGEN.L) is a British multinational financial services company that offers investment management, pension, and life insurance-related services to its consumers. The company stands seventh on our list of the best undervalued UK stocks to buy now.
After hitting a low of GBX 157.07 in March 2020, Legal & General Group Plc (LSE:LGEN.L) gained 45.8% in the past year, while its year-to-date returns came in at 8.09%. Legal & General Group Plc (LSE:LGEN.L) reported a profit of £7.1 million in the first half of 2021, while the company’s finance income stood at £33.6 million, up 2% from the same period last year.
Legal & General Group Plc (LSE:LGEN.L) pays an annual dividend of $0.65 per share, yielding 3.34%. In September, Citigroup reiterated its Buy rating on the stock, with a £300 price target. The stock has a trailing-twelve-month P/E ratio of 9.11.
6. BAE Systems plc (LSE:BA.L)
P/E Ratio: 10.77
BAE Systems plc (LSE:BA.L), a British multinational aerospace company, was awarded an $843.8 million contract from the U.S. army for Limited Interim Missile Warning System. The contract will be completed by 2026. The company stands sixth on our list of the best undervalued UK stocks to buy now.
BAE Systems plc (LSE:BA.L) is a strong dividend player and currently pays an annual dividend of GBX 24 per share, yielding 4.06%. The company’s dividend pay-out ratio stands at 43.64%.
Since the beginning of the year, BAE Systems plc (LSE:BA.L) delivered a 20.13% return to shareholders, while its 12-month returns came in at 23.9%. The stock is traded at a trailing twelve months P/E ratio of 10.77.
Like Bank of America Corporation (NYSE:BAC), The Kraft Heinz Company (NASDAQ:KHC), DaVita Inc. (NYSE:DVA), Berkshire Hathaway Inc. (NYSE:BRK-B), and Amazon.com, Inc. (NASDAQ:AMZN), BAE Systems plc (LSE:BA.L) is a notable stock to invest in.
5. Taylor Wimpey plc (LSE:TW.L)
Number of Hedge Fund Holders: N/A
P/E Ratio: 11.68
Taylor Wimpey plc (LSE:TW.L) is a Blackpool-based housebuilding company, which builds approximately 15,000 houses in the UK annually. The company ranks fifth on our list of the best undervalued UK stocks to buy now.
Taylor Wimpey plc (LSE:TW.L) experienced a profitable 2020 as the company generated revenue of £2.79 billion during that year. Moreover, the stock gained 24.9% in the past year, after reaching its all-time low of GBX 101.5 in March 2020, and is currently traded at GBX 149.4. Taylor Wimpey plc (LSE:TW.L) pays an annual dividend of GBX 8 per share, yielding at 5.35%, with a dividend payout ratio of 60.15%.
This August, Barclays raised its price target on Taylor Wimpey plc (LSE:TW.L) to GBX 205, while maintaining an Overweight rating on the shares. The company has a trailing twelve months PE ratio of 11.68.
4. ITV plc (LSE:ITV.L)
Number of Hedge Fund Holders: N/A
P/E Ratio: 11.47
The British multinational media company, ITV plc (LSE:ITV.L) stands fourth on our list of the best undervalued UK stocks to buy. In April 2020, the company’s shares slumped, reaching GBX 54.42, due to the Covid-related market clampdown. However, in the past year, the stock returned 36.90% and is expected to grow by 24.3% in the coming years.
Recently, Morgan Stanley raised its price target on ITV plc (LSE:ITV.L) to GBP 190, while keeping an Overweight rating on the shares. In 2020, ITV plc (LSE:ITV.L) reported revenue of £2.78 billion, down 16% from the prior-year quarter.
ITV plc (LSE:ITV.L) is one of the largest media companies in the UK as it holds 13 of the 15 regional television licenses. The company currently pays an annual dividend of GBX 5.40 per share, yielding 4.64%. ITV plc (LSE:ITV.L) has a trailing twelve months P/E ratio of 11.47.
3. Imperial Brands PLC (LSE:IMB.L)
Number of Hedge Fund Holders: N/A
P/E Ratio: 5.28
As FDA seeks more time to announce the fate of vaping products in the UK, Imperial Brands PLC (LSE:IMB.L) recently announced that the company is well-positioned to deliver financial results in line with the expectations. A British multinational tobacco company, Imperial Brands PLC (LSE:IMB.L) ranks third on our list of the best undervalued UK stocks to buy now.
In the first half of 2021, Imperial Brands PLC (LSE:IMB.L) reported revenue of £15.57 billion, showcasing a 6.1% year-over-year growth. In the past year, the stock delivered a 16.37% return to shareholders. The company pays an annual dividend of GBX 1.38 per share, yielding 0.09%.
Jared Dinges of JPMorgan raised the firm’s price target on Imperial Brands PLC (LSE:IMB.L) to GBP 2,100 while maintaining an Overweight rating on the shares. The company has a trailing twelve months P/E ratio of 5.28.
2. Sportech PLC (LSE:SPO.L)
Number of Hedge Fund Holders: N/A
P/E Ratio: 3.28
Sportech PLC (LSE:SPO.L) ranks second on our list of the best undervalued UK stocks to buy now. A British gambling and entertainment company is mainly known for its widely used digital channels as the company’s tech solutions are used in Europe as well as North and South America. Sportech PLC (LSE:SPO.L) reported a 16% growth in its digital platform in its interim 2021 report, compared with the same period last year.
Since the beginning of the year, Sportech PLC (LSE:SPO.L) delivered a 39.3% return to shareholders, while the stock gained 103.3% in the past year. In the first half of 2021, the company reported revenue of £13.4 million, up from £7.8 million during the same period last year. Its service revenue accounted for £1.9 million of the gross revenue. Sportech PLC (LSE:SPO.L) has a trailing twelve months P/E ratio of 3.28.
1. Cineworld Group plc (LSE:CINE.L)
Number of Hedge Fund Holders: N/A
P/E Ratio: 3.22
Cineworld Group plc (LSE:CINE.L) is one of the largest British cinema companies that has nearly 9,500 screens in over 800 locations. The company derives 68% of its revenue from the U.S., while the UK and Ireland account for 18% of the gross revenue. It tops our list of the best undervalued UK stocks to buy now.
This July, Berenberg raised its price target on Cineworld Group plc (LSE:CINE.L) to GBX 85, while maintaining an Equal Weight rating on the shares. The company announced its interim results 2021 on August 12. Cineworld Group plc (LSE:CINE.L) generated revenue of $293 million, while it opened over 10 new sites during 2020 across the U.S., Europe, and the UK.
In the past year, Cineworld Group plc (LSE:CINE.L) delivered a 136.7% return to shareholders, after hitting its all-time low of GBX 44.2 in March 2020. The stock is currently traded at GBX 63.92.
You can also take a look at 10 Best Undervalued Stocks to Buy Now and 10 Best Undervalued Dividend Stocks to Buy Now
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Disclosure. None. 10 Best Undervalued UK Stocks to Invest In is originally published on Insider Monkey.
