Quite often the market presents me with an opportunity to buy UK shares on sale. Today I’m looking at companies that are showing signs of progress, but crucially whose share prices have drifted lower in recent weeks or months.
The fundamentals of a company rarely change on a day-to-day basis. But the same can’t be said for share prices. And when the market offers ‘no-brainer’ shares that I believe are selling at a discount, I like to pounce.
UK shares on sale
One such UK share that I’d buy this month is global banking giant HSBC (LSE:HSBA). It recently reported a jump in pre-tax profits of $18.9bn for 2021. That’s more than double the figure seen in 2020. HSBC is benefiting from the global economic recovery following the pandemic. As restrictions end around the world, more economic activity is likely to take place. That bodes well for the FTSE 100 bank.
Looking forward, HSBC should benefit from rising interest rates too. With the aim to rein in surging inflation, the base rate increased to 0.5% in February. But market analysts expect the Bank of England to raise it again over the coming months. Typically when interest rates rise, banks can earn more from lending activities such as mortgages than they need to pay out for interest-bearing customer deposits.
That said, higher interest rates could deter some borrowers. It could also raise competition for mortgage products. Overall though, I’d expect the net effect to be positive for HSBC. Finally, its share price is up by 24% over the past year, but has drifted lower in recent weeks. I reckon that gives me an opportunity to buy these shares at a discount right now. It’s one that I’d consider for my Stocks and Shares ISA.
Best performing FTSE 100 stock
Another company with strong fundamentals but with a share price that has stalled in recent weeks is Airtel Africa (LSE:AAF). Its share price has gained a whopping 82% over the past year, making it the best-performing FTSE 100 share. Its share price stumbled last month after two large holders sold shares. I reckon this could limit share price performance in the very near term, but even so, it still looks promising as a long term buy-and-hold UK stock.
As the name suggests, Airtel Africa focuses on providing telecom services in 14 African markets. There’s much to be excited about in this space.
Demand for voice, data and digital money services is set to grow for many years. And the region offers several encouraging trends. These markets have high population growth rates. They also tend to have much younger populations than other parts of the world. That coupled with an expanding middle class and limited banking facilities all bodes well for this established telecoms player.
Recent financials look good. Its pre-tax profit in the nine months ending 31 December surged 79% to $864m. That said, there are some risks to consider. Competition is rising, it’s a highly regulated sector and there are cyber security risks.
But I consider Airtel to be a good-quality share with excellent growth prospects and an undemanding valuation. It’s definitely a UK share that I’d consider tucking away for several years.
Harshil Patel has no position in any of the shares mentioned. The Motley Fool UK has recommended Airtel Africa Plc and HSBC Holdings. 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.
