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I’m definitely not against the FTSE 100, but I believe it is a favorable time to search for excellent deals among the broader London Stock Exchange. Numerous high-quality UK shares are currently trading significantly below their inherent values due to recent fluctuations in the market.
Allow me to present the evidence! I will also disclose the three leading British stocks on my wishlist today.
An abundance of bargains
Source: Octopus Investments
According to a new report from analysts at Octopus Investments, British shares are currently being traded at a approximately 40% discount when compared to the rest of the developed world. As depicted in the above chart, this inequity has been rapidly escalating during the past six years.
The study declares that “The FTSE 100 is experiencing a substantial discount compared to its long-term average multiples” at present. The average price-to-earnings (P/E) ratio for London’s primary stock index currently stands at approximately 11 times.
Despite this, Octopus asserts that UK shares are being excluded from the leading index and are therefore appearing at an even more appealing price. The report indicates that smaller shares are currently being traded at an 18% discount in relation to the FTSE 100’s forward P/E ratio. As illustrated in the below graphic, this exceeds the historical average of 9%.
Source: Octopus Investments
It appears arguable that such low valuations are not warranted. As Octopus contends: “Small and mid-cap stocks continue to demonstrate solid trading performance,” and further adds that “Companies possess strong capitalization, and with an anticipated stabilization of interest rates, the future prospects remain robust,”
I have 3 UK shares on my radar
In recent days, I have been diverting my attention away from the FTSE 100. Just last week, I included additional Sports Workshop shares in my portfolio following a significant decline in their price. Moreover, I am actively seeking out more inexpensive stocks.
Bank of Georgia Group is one FTSE 250 company that is currently featured on my potential investment list. It is presently being traded at a forward P/E ratio of 4x while also providing a 10% dividend yield.
While the broader banking sector continues to face pressure, adjusted profits for this specific organization rose by 29% between January and June. Despite encountering intense competition, I anticipate a continuation of the favorable earnings momentum for TBC Bank as the demand for financial services in emerging markets intensifies.
In my opinion, Central Asia Metals also appears to be excessively undervalued to pass up. It is being traded at a P/E ratio of 6.2x for 2023, accompanied by a 10% dividend yield.
I believe that its share price has the potential to increase from its current levels alongside the surge in consumption of the so-called energy transition metals. The company possesses the Konrad copper mine in Kazakhstan and the Sasa lead-zinc project in North Macedonia.
Ultimately, I am considering adding Bluefield Solar Income Fund to my stock portfolio. As the name suggests, this company generates revenue by investing in renewable energy assets. Consequently, earnings may be at risk during inclement weather conditions.
Nevertheless, I expect the demand for clean power to soar in the long run. I believe that this is simply not reflected in the forward P/E ratio of 8.5x. Bluefields also offers a substantial dividend yield of 7.7%.
These are several exceptional stocks that investors can acquire at affordable prices today.
Overlook the post FTSE 100! Why now might be the opportune moment to purchase alternative UK stocks! appeared first on The Motley Fool UK.
Royston Wild holds positions at Games Workshop Group PLC. The Motley Fool UK recommends Games Workshop Group PLC. The views expressed on the companies mentioned in this article are those of the author and may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners, and Pro. Here at The Motley Fool, we believe that considering a wide variety of insights can make us better investors.
Motley Fool UK 2023