Right now, the world’s full of stretched valuations and expensive stocks, but genuine value can still be found if you know where to look.
And this month, several institutional analysts have been flagging two UK shares in particular that stand out as potential bargain buys right now. Here’s why.
A housebuilder hiding in plain sight
Berkeley Group‘s (LSE:BKG) one of the UK’s most distinctive housebuilders. Unlike its mass market peers, Berkeley focuses almost exclusively on complex brownfield regeneration, transforming disused urban land into high-quality homes in London and the South East.
After resetting its strategy in April in response to a tougher tax and regulatory backdrop, the shares tumbled sharply. But it seems leadership had strong conviction in their updated strategic trajectory, given three directors, including executive chair Rob Perrins, immediately started taking advantage of the self-off, investing hundreds of thousands.
That kind of insider conviction is worth noting. And it seems the analysts at Berenberg agreed, reiterating their Buy recommendation with a share price target of 4,000p – around 20% higher than where the shares are trading today.
However, this price point rests on a few key pillars, including an expected capital returns programme of 6% a year until 2030, a robust balance sheet, and 18% operating margins even with a tough macroeconomic backdrop.
So far, Berkeley seems to be delivering on these expectations. However, there’s no denying the firm’s exposed to several simultaneous threats.
Uncertainty in the London property market and build-cost inflation threaten profit margins. And with limited earnings growth expected for the coming years, investors will undoubtedly have to be patient.
A fizzy drinks compounder few people talk about
While most eyes are on Diageo, AG Barr (LSE:BAG) has continued to operate as a quiet compounder that rarely makes the headlines.
The beverages giant is responsible for brands such as Irn-Bru, Rubicon, and Boost, as well as a growing range of premium soft drinks following recent acquisitions. And it’s that under-the-radar status that brought it to the attention of several value-focused experts.
Both Panmure Liberum and Peel Hunt have both issued Buy recommendations with price targets of 750p and 770p respectively. That implies up to a 22% potential gain could be unlocked over the next 12 months for investors who buy shares today.
Obviously, no forecast is ever set in stone and, in the case of AG Barr, continued success will ultimately be dependent on the successful integration of its recent acquisition spree.
