Despite the last decade being one of the longest bull markets in history, FTSE shares have underperformed versus US stocks. The lack of tech-driven enterprises on the London Stock Exchange has resulted in lacklustre returns for the UK’s flagship indices versus the S&P 500 and Nasdaq 100. However, this may have also created a lucrative opportunity for patient investors.
Pairing a decade of low growth with continued investor pessimism has resulted in cheap-looking valuations for many British businesses. And it seems some investors have already caught onto this fact. After all, the FTSE 250 is already up by double-digits over the last six months.
Moreover, with the 2023/2024 April ISA deadline fast approaching, times are running out to capitalise on the £20,000 tax-free allowance. In other words, March could be the best month to start snapping up cheap shares and building wealth.
Finding quality at a cheap price
FTSE shares come in a wide range of shapes and sizes. Most investors tend to focus on the UK’s flagship indices like the FTSE 100 and FTSE 250. But these only represent around half of the FTSE universe. With 569 companies to choose from, ranging across all major industries, pinpointing the best opportunities can be a bit of a challenge. So where should investors start looking?
The best bargains are often the ones which most people haven’t noticed yet. And that makes exploring sectors that have fallen out of fashion a terrific place to start, in my experience.
Industries like electronics and manufacturing are dealing with some significant tailwinds right now as short-term global demand is shrinking in the current economic climate. Yet the long-term picture remains sound. So providing the businesses operating in this arena have the fundamentals to weather the storm, snapping up underappreciated shares today could lead to terrific long-term returns. And that’s what’s brought RS Group (LSE:RS1) onto my radar.
A top stock to buy?
As a critical supplier of maintenance, repair, and operations products, RS Group plays a crucial role in over a million manufacturing companies worldwide.
It acts as a middleman, building up relationships with component suppliers to transform itself into a one-stop shop for other businesses who don’t want to deal with the nightmare that is supply chain management.
Lately, shares haven’t exactly been giving a stellar performance. In fact, they’ve tumbled by nearly 25% over the last 12 months.
The combination of a drop in electronics demand, paired with the destocking of inventory levels worldwide, has caused RS Group’s sales and earnings to slump. And with investors still on edge following the recent market correction, a tumbling market capitalisation isn’t exactly surprising.
However, with the American, Australian, and Chinese manufacturing industries starting to ramp back up, this period of lacklustre growth could be coming to an end. And considering management has a long track record of navigating this cyclical industry, the business appears to be perfectly positioned to thrive as things rebound.
In other words, this cheap-looking FTSE share could be on track for some stellar long-term growth despite the short-term headwinds and risks.
