While the FTSE 100 hit new all-time highs last month, not all UK shares have been rallying. Looking at the data, there are still a lot of stocks that are way off their highs.
Here, I’m going to highlight three discounted stocks that look interesting to me. I think investors should consider buying these big names in May.
Diageo
First up is alcoholic beverages giant Diageo (LSE: DGE).
The owner of Johnnie Walker and many other well-known brands, this is a world-class company. And right now, the stock is on sale.
Yes, the group is facing a few challenges at present. In Latin America and the Caribbean, for example, sales have slowed.
However, I think these kinds of issues are reflected in the valuation.
Currently, Diageo’s price-to-earnings (P/E) ratio is 17.5. By contrast, rival Brown-Forman (which owns Jack Daniels) has a P/E ratio of 24.
Of course, we could see further pressure on sales in the near term. While interest rates are high we can’t rule out a consumer slowdown.
Taking a long-term view though, I reckon the shares should do well as consumers keep buying Diageo’s premium brands.
I will most likely add to my own holding here in the near future.
Whitbread
Next we have Whitbread (LSE: WTB), the owner of hotel chain Premier Inn.
This stock has taken a big hit this year. It seems investors are worried that budget travellers could be running out of money.
I reckon the share price fall has created an opportunity.
Looking ahead, I think affordable hotels are likely to remain in demand. One thing that could support demand is Taylor Swift’s Eras tour, which comes to the UK this summer. Last year, this provided a massive boost for hotels in the US.
It’s worth noting here that earlier this week, Whitbread hiked its full-year dividend by 26%. This suggests that management is very confident about the future.
The group’s lack of geographic diversification is a risk to consider. Premier Inn only operates in a few countries so it’s not as diversified as larger hotel operators like InterContinental Hotels (which I have shares in).
I believe the overall risk/reward proposition is attractive right now, however. With the shares currently trading on a forward-looking P/E ratio of 13.9, I like the set-up.
The Renewables Infrastructure Group
Finally, we have The Renewables Infrastructure Group (LSE: TRIG). This is an investment company that owns a portfolio of clean energy assets (wind and solar farms, etc).
This stock has been hit by higher interest rates. That’s because it has some debt on its balance sheet. Higher rates have also increased the appeal of safer investments such as bonds and cash savings.
I see scope for a rebound, however. Looking ahead, lower rates should provide a more favourable operating environment.
And in the long run, the company is well positioned to benefit from the clean energy boom.
It’s worth noting that management is targeting a dividend payment of 7.47p this year. That equates to a yield of around 7.6% at today’s share price.
This means investors are likely to be paid to wait for a rebound in the share price.
As always though, there are no guarantees – either with the share price or the dividends. If interest rates were to rise from here, the renewable energy stock could underperform.
