Over the previous few years, buyers appear to have turned their backs on UK shares. In all equity, I can perceive why.

From Brexit to the pandemic and, extra just lately, double-figure inflation, the UK inventory market has been beneath loads of stress. Many share costs haven’t delivered nice returns and UK shares have been ignored as such.

However this appears to be altering. FTSE 100 and FTSE 250 shares have gotten off to a flying begin in 2024. It appears UK shares might be coming again into trend.

Besides, they nonetheless look dust low cost. I feel now might be an opportunity to capitalise on undervalued costs earlier than we see them soar within the years to come back.

Coming in scorching

After a fairly monotone 2023, Footsie shares have upped the tempo in 2024. 12 months to this point, the FTSE 100 has risen 6.1%. On the similar stage final yr, it was down 0.9%. The FTSE 250 has climbed a formidable 6.1%. Equally, at this level final yr, it had fallen by over 3.6%.

However even with a stable begin, loads of shares nonetheless look dust low cost. In the present day, Footsie shares commerce on a mean price-to-earnings (P/E) ratio of 11. That’s means beneath their long-term historic common of round 15.  

Not simple

That’s to not say it’ll be an easy trajectory. The financial system’s nonetheless flagging, and dangers do stay within the close to time period.

Inflation figures for April got here in larger than anticipated. Whereas some have been speculating about rate of interest cuts as early as subsequent month, that now appears extremely unlikely.

However I’m not going to let bouts of short-term volatility distract me from my long-term objectives. Potential setbacks over the upcoming months gained’t cease me from shopping for up shares that current nice worth.

One instance

An instance of that’s Barclays (LSE: BARC). The Blue Eagle Financial institution is up 40.7% this yr alone. But its shares have a P/E ratio of simply 8.5. I can’t assist however really feel that it seems like a steal and it’s a mismatch I plan to capitalise on.

With that in thoughts, it’s shares like Barclays that I plan to proceed shopping for within the months to come back. What’s even higher, at its present price, the inventory’s buying and selling on a P/E of round 5 for 2026.

Alongside its low cost valuation, the inventory has a wholesome 3.7% dividend yield, lined over thrice by trailing earnings. The financial institution has set out the bold intention of giving again up to £10bn to shareholders over the following three years through dividends and share buybacks. Final yr, the quantity it paid out through dividends elevated by almost 40% yr on yr.

As I outlined above, I’m anticipating additional volatility. With rates of interest more likely to be minimize within the near-to-medium time period, Barclays will see its margins shrink within the years to come back. We’ve already seen this. For Q1, its web curiosity margin fell to three.09% from 3.18%.

However with the enterprise just lately saying a strategic overhaul that can see it streamline, increase effectivity, and make up to £2bn in financial savings by 2026, I’m bullish on its long-term prospects.

With its share price trying low cost, I feel now looks like a sensible time for buyers to think about undervalued UK corporations corresponding to Barclays.