It is a tough time to be an investor. The outlook for the economy is highly uncertain, and it has only become more uncertain with the arrival of the new coronavirus variant. However, with uncertainty growing, I think now is the perfect time to go hunting for undervalued shares to buy.
I would buy five companies that stand out to me as being highly undervalued right now, considering their growth potential.
The best shares to buy now in uncertain times
The first I would buy is AO World. Due to the supply chain crisis, the company is struggling to meet the growth forecasts management set out at the beginning of the year. These challenges have put downward pressure on the shares.
I would take advantage of this decline while the firm is struggling, as it still occupies a strong position in the UK white goods market. This suggests that when the supply chain crisis is resolved, AO World can return to growth.
Another company that is suffering from short-term headwinds is WH Smith. In the run-up to the pandemic, the group was focusing on its convenience stores in travel hubs to drive growth. The strategy fell apart when the pandemic arrived, and consumers were encouraged to stay at home. These headwinds could continue to weigh on the business for some time.
However, WH Smith has the financial capacity to support its stores throughout the uncertainty. This should mean the firm can capitalise on the recovery as it takes shape. This potential is the reason why I believe this is one of the best shares to buy now.
Return to growth
Mulberry is already in recovery mode. For the 26 weeks ended 25 September, sales jumped 34%. The group’s profit hit £10m up from a loss last year, and the business ended the period with a cash balance of £30m.
Management believes it can maintain this growth with the company’s new sustainable products and additional marketing efforts. A focus on UK-based factors also helps insulate it from the international supply chain crisis, although there is still a risk the group will be impacted by supply chain issues outside of its control.
Manufacturer and distributor of wiring accessories Luceco is reaping the benefits of the UK construction boom. Sales jumped 28% compared to 2019 levels in the third quarter. Management is using these windfall profits to invest in organic growth initiatives and acquisitions. These should help underpin the group’s growth for the years ahead.
This potential for a multi-year growth spurt makes the group one of the best shares to buy now, in my opinion. Inflation headwinds are the company’s most significant hurdle right now, which could impact profit margins in the near term.
Ahead of expectations
AG Barr recently announced it expects trading this year to come in ahead of expectations. I think this proves that the soft drinks manufacturer has the durability to weather the current economic uncertainty, which should mean it is well-placed to stage a recovery on the other side.
Further pandemic restrictions could hit growth, but I think AG has tremendous potential even after considering this headwind.
Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended AG Barr. 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.
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