No one knows truly knows where UK shares will go in 2025. But I can see several enticing value stocks for bullish investors to consider adding to their portfolios now in the hope that markets have a stellar year.
The recovery is on!
Luxury timepiece seller Watches of Switzerland (LSE: WOSG) is one example of a stock that appears poised to rebound strongly. In fact, one could say that recovery has already started. Having endured a tricky few years thanks to a cost-of-living crisis, the shares are up 34% in the last month alone!
This momentum was no doubt helped by some reassuring half-year results in early December. Back then, management reported 4% revenue growth thanks to an “encouraging improvement in trading in Q2“, partly attributed to better demand in the UK and US.
There’s still time to consider buying
I think there could be even more potential ahead, especially as the stock still trades at a price-to-earnings (P/E) ratio of 14. That’s not a low as it was a few months back but it’s below the company’s average P/E of 19 over the last five years. Nor does it feel particularly excessive if (and here’s the mighty ‘if’) the UK economy holds its own next year.
Whether the latter will happen is open to debate. If inflation bounces higher, the Watches of Switzerland share price will probably move sideways at best. There’s also no dividend stream to compensate investors for staying put.
If, however, inflation comes back in line with the Bank of England’s target of 2%, we could see more cuts to interest rates. This should then feed down to improved consumer confidence, possibly leading to earnings upgrades from the Leicester-based business.
Dirt cheap
FTSE 100 member JD Sports Fashion (LSE: JD) is another company that I think offers great value. Its forecast P/E ratio for FY26 (beginning in February) stands at a staggeringly-cheap seven. Again, that looks very attractive considering the company’s five-year average is no less than 20!
This is not to say that the £5bn cap doesn’t face a number of challenges right now. For example, one of the main brands it sells — US giant Nike — is having a nightmare year as smaller, innovative rivals like On and Hoka have taken market share.
Overseas growth
Can the above be considered a long-term issue, though? I’m sceptical, especially if Nike’s new(ish) CEO Elliott Hill delivers on his promise to revitalise the business. More generally, the future of the global sportswear market looks robust.
In fact, JD Sports looks particularly well-equipped to ride out any storm thanks to its multi-brand, multi-channel offering and rapid overseas growth. Earlier this year, it acquired US rival Hibbett as part of a strategy to expand its footprint across the pond.
I also think it’s quite comforting that there appears to be very little interest in the company from short sellers. In other words, not many traders seem willing to gamble that the share price has further to fall.
Buying a stock when no one else will has the potential to be lucrative in the long term. Although there’s a chance things could get off to a bad start if January’s Q4 trading update fails to impress, that could prove to be the case here.
