Even with the UK stock market outperforming and trading near all-time highs, there are still plenty of UK shares that have fallen behind. Some have been beaten down so hard that investors have almost written them off entirely.
But that may have also just created a fantastic opportunity for shrewd investors…
History shows that sold-off stocks can often become fantastic buying opportunities if and when recovery rallies get underway. And right now, Vodafone (LSE:VOD) and Diageo (LSE:DGE) both look like names that may have already started that process.
Vodafone’s reset story
Vodafone’s one of the UK’s best-known telecoms groups and likely needs no introduction. But the last few years have been pretty brutal.
Weak growth in key European markets, a heavy debt burden, and a long period of strategic drift have dragged the shares lower and left investors deeply frustrated. At least, that was until Margherita Della Valle moved into the corner office.
While it took a while to get the ball rolling, she has successfully begun reshaping the business through asset sales, portfolio simplification, and tighter capital discipline. And with the group’s renewed focus on cash generation starting to translate into superior financial results, Vodafone shares are finally starting to climb again.
In fact, the stock’s already up over 55% in the last 12 months.
There’s still a long way to go before Vodafone can return to its peak valuation years of the early 2010s, and it’s difficult to know whether the company can maintain its current momentum, or if this is just a temporary boost.
Don’t forget, telecommunications is a fiercely competitive and unforgiving sector. And Vodafone still has plenty of execution risk ahead. But nevertheless, it’s hard not to notice the progress made under Della Valle’s leadership. And it’s a recovery story that might be worth considering.
Diageo’s untapped potential
Diageo’s had a very different problem from Vodafone. The drinks giant’s still a world-class enterprise. But its shares have nonetheless been hammered by slowing sales, weaker consumer demand, and inventory destocking headwinds across its key markets.
That slump’s been painful, especially after years of being viewed as a premium compounder. But there are signs that the pressure’s beginning to ease.
Under the new leadership of Dave Lewis, management’s been taking costs out of the business, adjusting inventory levels, and leaning on the strength of its leading spirits brands to stabilise the outlook.
The bull case is that with Diageo shares priced so cheaply, the company likely doesn’t need heroic growth to kick off a recovery rally.