Black Friday and Cyber Monday may offer deals on retail goods, but for savvy investors now is the time to take advantage of some stock market bargains that could actually grow your money.
Black Friday deals
Where are these so-called ‘value’ opportunities? In the UK stock market for one. Shares in many companies listed on the FTSE 100, the main UK stock index, are trading at big discounts to their global rivals, and below their long term averages.
This means investors can invest in good companies on the cheap, by buying individual company shares, or an index tracker fund that invests in the whole FTSE 100.
UK banks are particular bargains right now. Barclays’ share price, for example, is down 13% since the start of the year, partly because investors were unpleasantly surprised by its latest results. But analysts think things aren’t as bad at the bank as the stock price fall suggests. Investors could snap up the shares for less than they are really worth.
Matt Britzman, equity analyst at investment platform Hargreaves Lansdown, says: “Barclays continues to trade at a discount to European peers, largely as a result of poor image…and a lack of faith recent returns are sustainable. It’s a valid perspective, but one that’s now perhaps been a little overdone.”
UK energy companies are also in the bargain bin. BP disappointed with its most recent results and concerns remain around its renewable ambitions. But overall a strong cash flow is still enabling the oil and gas giant to invest in new projects, pay off its debts, and make generous payouts to shareholders.
Derren Nathan, head of equity research at Hargreaves Lansdown, says: “The valuation remains well below the long-term average…fundamentally BP is well placed to continue building shareholder value.”
Value-focused investing
If you’re nervous about picking individual company shares yourself, but want to do more than just track the stock market, you can opt for a fund or an investment trust that invests in a range of companies, spreading the risk. A value fund manager will find bargain companies they believe are undervalued against their long-term potential.
Three top picks of value-focused investment trusts that mainly invest in UK companies are Temple Bar Investment Trust, Murray Income Trust and Fidelity Special Values – all real Black Friday deals, according to investment platform BestInvest, as they are all available to buy into at prices lower than the value of their investment portfolios.
Temple Bar Investment Trust is a good example. It invests in clothing retailer Next, which delivered a total return for investors of 15.4% a year between 2001 and 2021, thanks in no small part to Next buying up its own shares from investors – known as a share buyback, it’s a nifty way for companies to give investors a cash boost.
Almost half of UK companies listed on the London Stock Exchange have undertaken a share buyback over the last 12 months and there could be a lot more of this to come, sweetening the already sweet deal offered to investors by UK companies.
Jason Hollands, managing director at Bestinvest, says trying to predict whether company shares have reached their lowest point before a rebound – the biggest bargain – is “virtually impossible”. But when share prices are at a deep discount to their long-term average levels, “this should offer a degree of comfort that over time they will recover and healthy gains will be made, even if there are short-term wobbles”, he says.
Inspired to shop around for investment bargains this Black Friday and Cyber Monday? Make sure you consider the quality and outlook for the business, not just the share price.
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