2 UK shares I’d buy after their 25% declines make them cheap again

These two UK shares appear to be cheap after their disappointing stock price performances in 2020. I think buying them now could be a profitable move.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The performances of many UK shares have been disappointing in 2020. Risks including coronavirus and Brexit have weighed on investor sentiment. This has sent many stocks to their lowest levels for a number of years.

However, their falls could present buying opportunities for long-term investors. The recovery prospects for the economy and stock market mean that buying cheap shares today may prove to be a profitable move.

With that in mind, here are two FTSE 100 shares that have fallen 25%+ in 2020. They may now offer margins of safety that produce long-term investment gains.

A large decline relative to other UK shares

WPP’s (LSE: WPP) 38% fall since the start of the year means it has underperformed many UK shares. The advertising and branding business has experienced falling revenues as the world economy’s outlook has deteriorated.

However, its recent interim results showed that it is making progress in improving its long-term prospects. For example, it has continued to make cost savings and has further shifted its focus towards online opportunities. This could mean that it is in a good position to respond to a quickening in the move to e-commerce that is currently taking place among consumers.

Looking ahead, WPP is expected to outperform the financial performances of many UK shares next year. Its bottom line is expected to rise by around 30%. This puts it on a forward price-to-earnings (P/E) ratio of 9.2. Although its forecasts are likely to change depending on the economy’s outlook, it seems to offer good value for money after its share price decline. As such, now could be the right time to buy a slice of it for the long run.

An undervalued FTSE 100 stock

Standard Life Aberdeen (LSE: SLA) has also delivered a disappointing performance compared to other UK shares. Its share price is currently down 25% since the start of the year, with an uncertain global economic environment weighing on investor sentiment.

The company’s recent half-year results showed that it is making progress in implementing its strategy. For example, it was able to reduce adjusted operating expenses by 11% through a range of efficiency measures. It also delivered strong investment performance, with 68% of its assets under management outperforming their benchmarks.

Looking ahead, Standard Life Aberdeen is forecast to deliver a 17% growth in net profit next year after a challenging current year. This puts it on a forward P/E ratio of around 15.8, and suggests that it offers good value for money relative to other UK shares.

The potential for a global economic turnaround could lift asset prices, which would be likely to have a positive impact on the company’s financial performance. As such, now could be the right time to buy a slice of it for the long run after its recent decline.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens owns shares of Standard Life Aberdeen and WPP. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore 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 diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

£9k of savings? Here’s how an investor could aim to turn it into a second income of £560 a month

Christopher Ruane digs into the theory and numbers of how an investor could target a chunky monthly second income of…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

A top S&P 500 value share to consider as markets sell off!

Worried about the outlook for S&P 500 shares in the New Year? Buying value stocks like this tech giant is…

Read more »

Investing Articles

£20k of savings? Here’s how an investor could target £980 of passive income each month

With a £20k pot to deploy, our writer outlines how a long-term investor could target almost £1k a month in…

Read more »

Investing Articles

FTSE shares: a bargain way to start building wealth in 2025?

Christopher Ruane explains how, by buying FTSE 100 shares at what he thinks are bargain prices, he hopes to build…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

3 ISA mistakes to avoid in 2025

Our writer outlines a trio of mistakes investors can make in their ISA, to their cost, and explains why he’s…

Read more »

Older couple walking in park
Investing Articles

3 UK shares to consider as a long-term investment for retirement

Our writer identifies three UK shares with long-term growth potential he believes investors should think about holding until retirement and…

Read more »

Pink 3D image of the numbers '2025' growing in size
Investing Articles

Could this beaten-down FTSE 250 stock be on the cusp of a recovery in 2025?

After this FTSE 250 financial services stock lost another 24% of its value in 2024, Andrew Mackie sees the potential…

Read more »

The Milky Way at night, over Porthgwarra beach in Cornwall
Investing Articles

Warren Buffett says make passive income while sleeping! Here’s my plan to do so

Billionaire Warren Buffett has said many wise things over the past half a century, including a thing or two about…

Read more »