The popularity of UK shares may have declined in recent months. The stock market crash and partial recovery may have left investors feeling cautious about the prospects for UK stocks.
By contrast, the gold price and Bitcoin price have both surged since the start of 2020. This could naturally cause some investors to view them more favourably versus FTSE 350 shares.
However, with a number of UK equities currently appearing to offer good value for money, now may be the right time to buy these five stocks rather than the precious metal or virtual currency.
Cheap UK shares with growth potential in a stock market recovery
The valuations of UK shares such as Aviva and Kingfisher suggest that they offer wide margins of safety at the present time. The former has a dividend yield of over 7%, while the latter’s price-to-earnings (P/E) ratio is only just in the double-digits.
Looking ahead, the two companies could produce improving financial performances. Aviva is making wholesale changes to its asset base to create a more efficient business. Kingfisher is investing in its multichannel offering to provide greater convenience to consumers who are increasingly shopping online.
Income opportunities in a stock market rally
Other UK shares also appear to offer impressive long-term total return outlooks. For example, British American Tobacco has a 7%+ dividend yield, while GSK’s yield stands at around 6%. Both companies are in the process of making major changes to their business models. For example, British American Tobacco is pivoting to next-generation products as it seeks to reduce its dependence on tobacco. GSK is splitting into two separate businesses as it aims to maximise its specialisms.
Meanwhile, HSBC could deliver a recovery over the coming years. It is shifting its focus to products that are less interest-rate-sensitive. This may be a sound move given the likelihood for a prolonged period of low interest rates. The bank’s exposure to Asia may also aid its performance as the region’s economic growth forecasts are encouraging. This could allow it to outperform most UK shares over the long run.
Avoiding gold and Bitcoin
While gold and Bitcoin may have outperformed UK shares in recent months, the prospects for a stock market recovery could make a portfolio of FTSE 350 shares more appealing. History suggests that they have solid long-term recovery potential that may not have yet been fully maximised, despite strong gains made across the stock market in the second half of 2020.
Their solid financial positions, sound strategies and low valuations indicate that they may offer high total returns in the long run. Their prospects could be further boosted by a likely improvement in the global economic outlook, as fiscal and monetary policy stimulus eventually has a positive impact on global GDP growth.