Is now the right time to buy UK shares?

Bus waiting in front of the London Stock Exchange on a sunny day.

Why would I want to buy UK shares today? Surging energy prices. Rising interest rates. The risk of a recession. A potential stock market crash.

There’s lots to worry about in the real world. But, in my experience, this could make it a better time to buy shares. Here’s why.

Popularity is expensive

Legendary investor Warren Buffett once said that “the future is always uncertain; you pay a high price in the stock market for a cheery consensus”.

This matches up with my own experience. As an investor, what worries me most is when the market is acting as if nothing could go wrong. I know that’s not true, and I know that, sooner or later, this cheerful consensus will unravel. That’s when share prices fall.

We’ve seen some of that over the last six months. Growth stocks and smaller companies have been hit particularly hard, especially if they’re still loss-making. In my view, this is because the market has realised that these businesses just weren’t justifying their price tags.

Uber Technologies boss Dara Khosrowshahi has admitted as much. In a recent email to company staff he said that “the market is experiencing a seismic shift… we need to show them the money.”

I’m still not convinced by the investment case for Uber and its rivals. I won’t be buying these shares.

But here in the UK, I can see plenty of good value businesses that are already showing investors the money. These are the kind of stocks I’m buying right now.

UK shares for tough times

Most of the shares I’m buying at the moment fall into two categories. Among larger companies, I’ve mostly been buying consumer stocks that have fallen sharply over the last six months.

Some of the FTSE 100 stocks that look attractive to me at the moment include Unilever, Burberry, Tesco and housebuilders such as Redrow. All of these businesses have strong finances, good brands and are generating plenty of cash.

Of course, these companies could still face worse problems than anyone expects. That could hit share prices (and profits). However, if the worst happens, I’m confident these businesses will have the strength to survive and recover.

Remember this

There are always things to worry about. But history suggests the world – and the stock market — will muddle on. In 2020, we saw a terrible market crash as the pandemic broke. In 2016, we had the Brexit crash. In 2008/9, the great financial crisis triggered a crash.

Each time, things seemed pretty bad. But, in every case, the world has moved on and stock markets have recovered. I can’t predict world events. But what I can do is to focus on finding good companies with affordable valuations that have the potential to deliver long-term growth.

Using this selective approach to investing, I think it’s a great time for me to be buying UK shares. I have been buying shares in recent weeks, and plan to continue into the summer.

The post Is now the right time to buy UK shares? appeared first on The Motley Fool UK.

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Roland Head has positions in Burberry and Unilever. The Motley Fool UK has recommended Burberry, Redrow, Tesco, and Unilever. 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.