2 beaten-down UK shares to consider in an ISA before they recover
Investing in UK shares ahead of a recovery can unlock phenomenal returns for investors. Just ask anyone who bought Rolls-Royce stock back in early 2023.
For those that missed it, the FTSE 100 engineering giant executed a jaw-dropping turnaround that generated more than a 1,200% gain in just three years, transforming £5,000 into £67,300!
The good news is, even after delivering solid returns in 2025, the FTSE 100 is still filled with potentially lucrative British turnaround opportunities. And two that expert analysts have recently highlighted are Diageo (LSE:DGE) and Barratt Redrow (LSE:BTRW)
So should investors be rushing to buy these shares inside an ISA today?
Diageo â down 55% in three years
Shares of the world’s largest spirits company have been hit hard since its long-time CEO tragically passed away in 2023.
A combination of strategic missteps by his successor, weak demand in key markets like the US and China, along with a general reduction in consumer drinking habits have all weighed heavily on this enterprise. And consequently, Diageo’s stock price has been steadily sold off, with its market-cap more than slashed in half.
That’s obviously both concerning and frustrating for shareholders today. But the tide might finally be turning. Earlier this month, Sir Dave Lewis stepped in as the new CEO â a leader whose CV is filled with successful turnarounds, including Tesco.
Cost-cutting, renewed pricing discipline, and portfolio optimisation efforts are already underway. And with the added boost expected from lower interest rates, the stage seems set for Diageo to begin what could evolve into a remarkable recovery story.
Barratt Redrow â down 50% since 2022
Since its merger with Redrow in 2023, Barratt Redrowâs now the UK’s largest homebuilder. But sadly, size hasn’t protected it from the wider headwinds plaguing the UK residential construction sector.
Higher interest rates drove up mortgage rates. At the same time, inflation drastically increased both material and labour costs, putting pressure on profit margins. Throw in rising fears of a potential recession, and it’s not so surprising that the homebuilder saw its share price tumble 50% in just over four years.
But just like with Diageo, 2026 could prove to be the inflexion point that investors have eagerly been waiting for.
Further interest rate cuts will likely be followed by similar drops in mortgage rates, helping boost home affordability and, in turn, demand.
At the same time, supply reforms and deregulation of the British planning permission process could similarly spark fresh growth for the entire sector, especially companies like Barratt sitting on large land banks.
The bottom line
Neither of these businesses is guaranteed to deliver a successful turnaround in 2026. And even if they do, there’s no certainty they’ll be the next ‘Rolls-Royce’.
However, with the market pricing both companies at dirt cheap valuations, investor expectations seem to be quite low right now. And as a contrarian stock picker, that makes both of these stocks look intriguing. That’s why I think they deserve a closer look today. And they’re not the only turnaround play I’ve got my eye on right now.
The post 2 beaten-down UK shares to consider in an ISA before they recover appeared first on The Motley Fool UK.
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Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended Barratt Redrow, Diageo Plc, Rolls-Royce Plc, and Tesco Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
