We recently compiled a list of the 10 Best UK Stocks to Invest in Now. In this article, we are going to take a look at where BP p.l.c. (NYSE:BP) stands against the other best UK stocks.
The OBR (Office for Budget Responsibility) anticipates economic output in Britain to expand by 1.8% in 2026 and by 1.5% in 2027. In September 2024, KPMG reported that The Bank of England might take a more cautious approach when it comes to easing monetary policy as compared to the Fed and the ECB, with gradual cuts resulting in the UK base rate to 3.5% by 2025 end.
Furthermore, the labour market will continue to loosen, with fewer vacancies, and subdued pay growth but a relatively modest rise in the unemployment rate. KPMG went on to add that business investment might see some recovery next year if geopolitical uncertainties ease and the impact of reduced rates and the improving growth outlook offer businesses the confidence to commit to their investment plans.
What to expect from the UK Economy?
As per the new EY ITEM Club Autumn Forecast, the UK economy should grow 0.9% in 2024, down from the 1.1% growth expected in July’s Summer Forecast. The downgrade exhibits that household savings are now lower than expectations, providing less scope for consumers to increase their spending. Furthermore, lower-than-anticipated increases in consumer spending, together with cautious rate cuts to the Bank Rate, demonstrate that UK growth is expected to be steady rather than rapid over the upcoming 2 years.
EY added that business investment is expected to accelerate moderately in the coming years, with rate cuts providing a boost to the private sector. Therefore, the UK business investment should grow to 1.3% in 2024, an increase from the 1% expected earlier. Private sector investment is anticipated to accelerate to 3% in 2025, demonstrating a small downgrade from projections of 3.2% growth in its Summer Forecast.
Inflation Outlook for the UK Economy
EY expects that inflation is expected to average 2.6% in 2024 before falling marginally to 2.5% in 2025 and 2.1% in the following year. The firm believes that this ‘stickiness’ is because of several factors, such as tightness in the broader labour market, and the gradual slowing of pay growth. With spending growth anticipated to be lower than the earlier expectations because of reduced household saving rates, it projects consumer spending to rise by 0.8% in 2024.
EY expects that gradual cuts to the Bank Rate might provide some benefits to the UK’s housing market. It projects house price growth of 1.7% in 2024, and 2.1% in 2025, with declining borrowing costs anticipated to help offset other affordability challenges. Notably, the looser monetary policy is expected to have a modest impact on growth over the short term. Several borrowers on fixed rates will not experience the decline in their mortgage payments and a significant minority might refinance a fixed mortgage to a higher rate, despite a decline in Bank Rate.
Our Methodology
To list the 10 Best UK Stocks to Invest in Now, we used a screener to extract UK stocks. Next, we narrowed our list by selecting the ones having high hedge fund holdings. Finally, the stocks were ranked in an ascending order of their hedge fund sentiments, as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A business executive discussing investment opportunities in a stock exchange office.
BP p.l.c. (NYSE:BP)
Number of Hedge Fund Holders: 38
Headquartered in London, the United Kingdom, BP p.l.c. (NYSE:BP) offers carbon products and services. It operates through Gas & Low Carbon Energy, Oil Production & Operations, and Customer & Product segments.
BP p.l.c. (NYSE:BP)’s long-term growth trajectory is expected to be aided by a diversified energy portfolio and healthy brand recognition. The company continues to work on repositioning itself for future growth. It has a strong focus on returns and is diligently identifying new growth engines to drive its performance over the upcoming years. BP p.l.c. (NYSE:BP)’s shale business, BPX, is expected to be a significant contributor to its growth up to 2030. The shale sector’s capability to adjust production levels according to market conditions might offer the company valuable flexibility amidst the volatile energy market.
BP p.l.c. (NYSE:BP)’s investments in renewable energy and low-carbon technologies place it well to capitalize on the global energy transition. The company plans to update its mid-term strategy in February 2025, laying emphasis on cash flow generation and exploring organic acquisition opportunities. BP p.l.c. (NYSE:BP) has been refining its portfolio and continues to target significant cost savings moving forward. The company is confident in achieving a minimum of $2 billion of cash cost savings by 2026-end relative to 2023.
For 2024, in its Customers business, BP p.l.c. (NYSE:BP) is expecting growth from convenience, which includes a full-year contribution from TravelCenters of America, a healthier contribution from Castrol supported by volume growth in focus markets, and continued margin growth from BP pulse as a result of higher energy sold. Moreover, BP p.l.c. (NYSE:BP) continues to expect fuel margins to remain sensitive to the cost of supply.
As per Wall Street analysts, the shares of BP p.l.c. (NYSE:BP) have an average price target of $38.00.
Overall, BP ranks 5th on our list of the 10 Best UK Stocks to Invest in Now. While we acknowledge the potential of BP as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than BP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
