I’ve got my eye on a couple of UK shares that are at 52-week lows at the moment. In my view, the outlook for each is brighter than the market is currently expecting.
Both currently have dividend yields above 7%. But it’s not the passive income angle I’m looking at here – I think the stocks could be great investments, even if their dividends get cut.
ITV
First on my list is ITV (LSE:ITV). The stock is down around 26% over the last 12 months, but I think the long-term prospects for the company are better than its recent results indicate.
ITV has been slow to pick up on the transition to streaming. But with revenues from its linear operations declining, the company has finally made the shift.
In the short term, that’s proved expensive. Investment in the firm’s ITVX platform has caused a 52% decline in cash profits during the first half of 2023.
There’s a risk that a delayed start has put distance between the company and its competitors that will be hard to make up. At today’s prices though, I think that’s a risk worth taking.
The company has a market-cap of £2.4bn. Ignoring both streaming and linear TV entirely, that’s only 2.5 times the revenues of its production business, which makes programmes for other channels.
On top of that, I think the worst of the costs for setting up its streaming platform might be behind it. I’m therefore expecting the business to look up and the stock to do the same.
Dr Martens
If the last 12 months have been bad for ITV shareholders, they’ve been worse for Dr Martens (LSE:DOCS) investors. The stock is down around 62% since the middle of last January.
In some ways, the company has faced similar problems to ITV – attempting to shift its business model (in this case to e-commerce) has been expensive. But there’s more for investors to consider.
With increasing pressure on the cost of living, consumers are being more cautious with their spending. And with relatively high-priced products, Dr Martens is right in the firing line.
With data this week indicating that UK wage growth is slowing, there’s a risk this might continue. But I think the falling share price means investors are priced to take the risk.
The company generates substantial revenue from the US though. And I think the situation there looks significantly brighter, which leads me to think the share price could be due a recovery.
I’ve been buying the stock since the start of January and I intend to keep doing so. The more the share price goes down, the better I like the prospects for adding to my investment.
Finding value
I see both ITV and Dr Martens as decent businesses facing short-term difficulties. So an important part of the strategy here is being patient.
Each company has clearly made operational mistakes. But I think the market is overreacting in both cases and that’s creating potential buying opportunities that I’m looking at taking advantage of.
