A plan to buy the best UK shares at cheap prices is not a new idea. It has been used over many decades to take advantage of the ups and downs of share prices. It has generally been successful because it means an investor purchases stocks at discounts to their intrinsic values. Over time, this can mean high returns as their prospects and investor sentiment improve.
Clearly, deciding which companies are the best ones to buy is always going to be subjective. However, an investor with a clear strategy to identify such businesses, and to buy them at cheap prices, has an advantage. They could find that their portfolio doubles in value quicker than it would from tracking the stock market.
Buying the best UK shares now at cheap prices to capitalise on market cycles
The best UK shares to buy now are likely to be those businesses that will still be around to benefit from a long-term recovery. History suggests such a turnaround will ultimately happen across a range of sectors that continue to experience tough operating conditions for now. After all, the economy has always bounced back to post positive GDP growth following every previous recession. Similarly, the FTSE 100 has always produced new record highs after its bear markets.
Buying high-quality companies that trade at cheap prices is a simple way for an investor to use such a recovery to their advantage. After all, they are essentially buying companies for less than they are likely to be worth over the long run. Yes, they may fluctuate in price in the short run due to likely challenges in the coming months. But buying an asset at a low price provides greater scope for capital growth as a recovery takes hold.
Making 100% returns from high-quality companies
As mentioned, there is likely to be debate regarding what are the best UK shares to buy now. For example, some investors may focus more on growth, while others may prefer resilient businesses. However, a strategy that aims to identify them when they trade at low prices may be able to outperform the wider stock market. It could instil discipline and a requirement to focus on company fundamentals that avoids unattractive companies.
Even if such a strategy fails to beat the FTSE 100, matching the index’s return could lead to a doubling of an initial investment within nine years. The index has posted annual total returns of around 8% since its inception in 1984. This means that £1,000 invested in it has previously grown to £2,000 within nine years.
Clearly, the same rate of return cannot be guaranteed in future. As such, it seems logical to seek to outperform the stock market through buying the best UK shares now while they trade at cheap prices. They may be among the most likely stocks to beat the market to double an investment.