We can’t hide from the fact that, well, since Brexit, the FTSE has underperformed many of its peers. The FTSE 100 has grown sluggishly, with a mere 15% increase since the 2016 Brexit vote, translating to annualised gains of only about 2%. This underperformance is stark, especially when compared to other major markets — the tech-focused Nasdaq‘s up over 500% in the last decade.
So to many investors, the FTSE isn’t the place to get rich. But I’d challenge that narrative. While the major of my investments are in US-listed stocks, there are certainly enticing prospects and pockets of exceptional value in the UK, as well as unbeatable dividend-paying stocks.
Undervalued dividend payers
The first category is dividend stocks. Because UK stocks generally haven’t seen the level of share price appreciation of their US counterparts, many dividend-paying stocks now offer outlandishly large dividend yields.
This is simply because, in many cases, UK companies have continued to increase dividend payments, while the share prices have underperformed. This builds on the basic maths that when share prices fall, dividend yields go up.
With this in mind, investors may want to focus on strong dividend payers, notably those that appear to be undervalued. This could present investors with the opportunity to benefit from strong dividend yields, an improving dividend payment, and share prices appreciation.
This could include stocks like Lloyds. The banking group trades at a 20% discount to its average share price target while the current dividend yield of 5%’s expected to rise to 7% by 2026 on the back of dividend payment increases.
Finding the next multi-bagger
The term multi-bagger is used to describe a stock which doubles in value, or goes even higher. And according to Schroder UK Mid-Cap Plc, the UK, surprisingly, has a great track record for delivering multi-baggers.
However, finding the next multi-bagger can be challenging. And it can be difficult to know where to look. AIM-traded MaxCyte could be one option if we’re using analysts’ recommendations as a starting point.
The cell-engineer technology specialist has a price target of 672.05p, indicating that the stock could push 109.3% higher from its current valuation.
A sensible option for consideration
While a single year of investing may not make an investor rich, it can certainly put them in the right direction to build wealth over the long run. One company investors could consider to help them on this journey is pharma giant AstraZeneca (LSE:AZN), which has been in the wars in recent months, with its share price dropping due to multiple factors.
Clinical trial setbacks for its lung cancer treatment Dato-DXd, underwhelming early data from its weight loss drug portfolio, and an ongoing investigation in China have contributed to the decline. Despite these issues, analysts remain bullish on AstraZeneca, with no Sell ratings issued. The stock’s trading around 31% below the average share price target.
The company’s forward price-to-earnings ratio’s projected to improve significantly, from 35.6 times in 2023 to 17.4 times by 2026, reflecting confidence in sustained earnings growth.
Moreover, AstraZeneca’s diversified portfolio, particularly its strength in oncology and immunology, is expected to offset regional pressures. While concerns about potential sales weakness in China persist due to the government probe, analysts forecast that the company’s performance in other key markets will support continued success.
