In this article, we discuss the 10 best undervalued UK stocks to buy now. You can skip our detailed analysis of the undervalued stocks and go directly to read the 5 Best Undervalued UK Stocks to Invest In.
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.
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Disclosure. None. 10 Best Undervalued UK Stocks to Invest In is originally published on Insider Monkey.
