We recently published a list of the 11 Best Undervalued UK Stocks to Buy Right Now. In this article, we are going to take a look at where Burford Capital Limited (NYSE:BUR) stands against other best undervalued UK stocks to buy right now.
The UK and Europe’s Performance in Q1 2025
The global markets entered 2025 in the hope that the bullish run of the fourth quarter will continue in the first quarter of 2025. However, the uncertainty due to the tariffs led to the reversal of all gains made in the fourth quarter leading to a loss of 4.5%. However, on the positive side, the UK and the European market saw some excellent returns during the first quarter of 2025. Rory McPherson, the Chief Market Strategist of Wren Sterling, noted that the first quarter of 2025 was the best quarterly return quarter for the UK market since 2022. For the European market, it was their best quarterly return in over a year.
The performance of the UK and the European markets was based on several factors. Firstly, for Europe, the approval of a 500 billion Euro infrastructure fund and the lifting of restrictions on defense spending in Germany helped take the overall European market higher. This was also backed by the continued stimulus from the Chinese government to help fire up the engines of China and Germany. On the other hand, the UK market mainly benefitted from the better-than-expected corporate earnings, particularly from the banking sector. The UK’s banking sector reaped the advantage of its diversification, followed by its cheaper valuations, and increased profitability. As per Wern Sterling’s report, the UK banking sector grew its earnings by 30% year-over-year during the first quarter of 2025, which was similar to the growth of the Magnificent Seven in the United States. On top of this, the sector benefited from its extremely cheap valuation as compared to the top US stocks. The report also highlighted that the UK’s banking sector is using its excess cash to buy back stocks and increase dividends which makes it even more lucrative for shareholders.
How Will Tariffs Impact the UK’s growth
On April 24, Andrew Bailey, Bank of England governor, joined CNBC to talk about the impact of tariffs on the UK’s economy. He segregates the impact of tariffs into two portions, which are the impact on growth and the impact on inflation. He said that unfortunately, if we talk about the impact on growth, tariffs will have an impact in the longer run due to the closed nature of the global economy. Bailey elaborated that if we reduce the trade and openness of the global economy it directly impacts the growth trajectory of the economy. On top of this, there is the uncertainty effect which has led CEOs and consumers alike to postpone investment decisions. He noted that the UK already has a high saving rate, which shows that the people are simply uncertain about the economic and policy conditions that are restricting them from making investment decisions.
In terms of the inflationary impact, Bailey remains confident that the tariffs are not having an inflationary impact. He explains that inflation factors in a lot of other indicators, for instance, if trade with the United States is restricted the economy can redirect its exports to other markets. On the other hand, retaliation from the UK government could also lead to a deflationary impact.
To conclude, Bailey is more concerned about the impact of tariffs on growth as compared to inflation. He noted that the UK administration not only needs to address the supply and demand side issues related to growth but also has to tackle the trade issues with effective policies.
Our Methodology
To curate the list of the 11 best undervalued UK stocks to buy right now, we used the Finviz stock screener, Seeking Alpha, and Yahoo Finance as our sources. Using the screener we aggregated a list of UK stocks that are trading below the Fwd P/E of 15. Next, we cross-checked the Fwd P/E of each stock from Seeking Alpha and earnings growth from Yahoo Finance. Finally, we ranked these stocks in ascending order of the number of hedge funds that hold stakes in them, as of Q4 2024. Please note that the forward P/E data was collected on April 23, 2025.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
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Burford Capital Limited (NYSE:BUR)
Forward P/E Ratio: 8.98
Number of Hedge Fund Holders: 30
Burford Capital Limited (NYSE:BUR) is another financial services company based in the United Kingdom. It specializes in legal financial services such as core legal finance, complex strategies, post-settlement finance, asset recovery, and legal risk management.
Greenhaven Road Capital in its Q4 2024 investor letter noted the company to be a leader in litigation finance with a minimalistic losing rate on its cases. As per the company’s full-year report for 2024, Burford Capital Limited (NYSE:BUR) has grown its portfolio at a CAGR of 15% over the past 5 years. Management noted that the company is moving away from legacy portfolio labels to a more streamlined reporting structure focusing on return on invested capital and internal rate of return. As per Greenhaven Road Capital, the company has maintained a healthy historical IRR of 27%.
Last year, Burford Capital Limited (NYSE:BUR) established a new record for cash receipts and generated $556 million. This helped net realized gains grow by 75% year-over-year to reach $327 million for 2024. This is more than double the average annual gains over the past four years. The company ranks as one of the best undervalued UK stocks to buy right now.
Greenhaven Road Capital stated the following regarding Burford Capital Limited (NYSE:BUR) in its Q4 2024 investor letter:
“Burford Capital Limited (NYSE:BUR) – Burford isn’t just “getting there” – they’re already the leader in litigation finance with a 27% historical gross IRR and losses on only 13% of cases, according to their disclosures. I have gone out of my way in past letters to highlight just how good the company has been historically at financing litigation. They rarely lose money on cases, in part because the vast majority (76%) settle. They do, however, occasionally have “monster winners” that return 10X, 50X or even 100X their initial investment.
Burford’s leadership team personally owns stock totaling 9% (>$200M) of the company and has been a net buyer of the shares. With aligned insider ownership, historically low loss rates, and tangible book value making up more than 80% of their share price, Burford is a well-capitalized and sustainable business.
In 2024, Burford was worse than “dead money” as it posted a share price decline. It is rarely easy to isolate the cause of a share price decline, but apparently investors had some consternation over the slowing pace of investments in new cases. While I have tried to focus our attention on Burford’s current and future business, I think it is time to look deeper at the YPF case…” (Click here to read the full text)
Overall, BUR ranks 5th on our list of best undervalued UK stocks to buy right now. While we acknowledge the potential of BUR to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than BUR but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.
