3 UK stocks I like more than Rolls-Royce right now
UK investors looking for stocks to buy havenât had to look much further than Rolls-Royce in recent years. But with defence stocks trading at high prices, could it be time to look elsewhere?
Despite strong gains from the FTSE 100 recently, I think some quality stocks have been discarded by the stock market. And thatâs where Iâm looking for potential buying opportunities.
Compass Group
In general, I like businesses able to charge customers lower prices than their competitors while still making more money. Thatâs why Compass Group (LSE:CPG) stands out to me.
The contract catering firmâs size allows it to negotiate better prices from suppliers by ordering in bulk. And it uses this advantage to charge customers less and fend off competition.
The stock’s down 14% since the start of the year as investors weigh a few risks. One is the threat of anti-obesity medication and another is US hospitals finding themselves under financial pressure.
Importantly though, the companyâs competitive advantage is still firmly intact. Nobodyâs likely to match its scale any time soon and thatâs why I think itâs worth considering at todayâs prices.
Rentokil
Rentokil (LSE:RTO) shares fell 7% on Thursday (12 February). The reason is that one of the main risks â the amount of debt on its balance sheet â has become more of an issue.
The firm has a lot of debt after a huge acquisition a couple of years ago. And while itâs actually bringing its debt level down, itâs doing this with cash already borrowed at a higher rate.Â
Investors should watch the debt maturities, but I think the business is likely to be one of the most durable around. Pest control isnât going to be disrupted by AI or anti-obesity drugs.
Rentokilâs big acquisition brought a lot of debt, but it also made it the market leader. Thatâs a very valuable long-term position to be in, which is why itâs a stock Iâm watching closely at the moment.
Judges Scientific
By comparison, Judges Scientific (LSE:JDG) is a tiny operation. But the scientific instrument company is my number-one UK stock for investors to consider at the moment.Â
The share price is down 32% in the last 12 months. Thatâs largely because of weak demand from the US, where funding for scientific research has been under a lot of pressure from the government.
This is entirely out of Judges Scientificâs hands and thus represents a risk. Congress however, recently rejected the administrationâs proposals (and increased budgets instead of cutting them).Â
That should be a huge boost for the business. And while it isnât showing up in the share price yet, I think this could be a great time to buy shares in a company with some terrific long-term prospects.
Beyond Rolls-Royce
Rolls-Royce has been a brilliant stock for investors over the last few years. And the reason’s simple — it’s a quality business, but its shares were trading at a discounted price.
The question for investors is where to find that combination in today’s stock market. And Compass Group, Rentokil, and Judgest Scientific all fit into that category.
I think investors would be wise to give any of them a closer look. While I’m favouring Judges Scientific right now, I see all three as worthy candidates for consideration
The post 3 UK stocks I like more than Rolls-Royce right now appeared first on The Motley Fool UK.
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Stephen Wright has positions in Judges Scientific Plc and Rentokil Initial Plc. The Motley Fool UK has recommended Compass Group Plc, Judges Scientific Plc, and Rolls-Royce 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.
