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 Pentair plc (NYSE:PNR) 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 large computer terminal full of complex calculations tracking the company’s cash flow and investment management decisions.
Pentair plc (NYSE:PNR)
Number of Hedge Fund Holders: 40
Pentair plc (NYSE:PNR) offers various water solutions in the US, Western Europe, China, Eastern Europe, Latin America, the Middle East, Southeast Asia, Australia, Canada, and Japan. It is headquartered in London, the United Kingdom.
Pentair plc (NYSE:PNR)’s growth momentum is expected to be aided by its ongoing transformation efforts. It has been implementing an 80/20 strategy, focusing on the most profitable products and customers. The US Federal Reserve’s rate cuts are yet to stimulate the company’s rate-sensitive Residential and Pool businesses significantly.
Wall Street believes that the positive effects of the rate cuts will be visible in 6-9 months, potentially acting as a tailwind for Pentair plc (NYSE:PNR) in the coming quarters. A rise in consumer confidence and higher spending on home improvement should boost demand for pool construction, renovation, and maintenance services. This trend is expected to result in increased sales of Pentair plc (NYSE:PNR)’s pool equipment and water treatment products. Furthermore, a strong residential market might lead to cross-selling opportunities for the company’s other product lines, like water filtration systems for homes.
The residential market, which remains critical for the company’s Pool segment, should undergo a cyclical recovery. This expected upturn might fuel demand for Pentair plc (NYSE:PNR)’s products and services, mainly in the pool build and remodel categories. Moving forward, the company’s strategic pricing, operational efficiencies, and diverse product segments are expected to act as tailwinds. Notably, the pricing in the Pool segment has been projected to remain stable despite inflationary pressures.
Pentair plc (NYSE:PNR)’s strategic focus on its water portfolio, together with effective cost management and transformation initiatives, places it well for continued growth. Analysts at Stifel Nicolaus upped their price target on shares of the company from $101.00 to $115.00, giving a “Buy” rating on 16th October.
Overall, PNR ranks 4th on our list of the 10 Best UK Stocks to Invest in Now. While we acknowledge the potential of PNR 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 PNR 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.
