9 Once-In-A Lifetime Blue-Chip Opportunities Yielding As Much As 10% (2024)

Last week, interest rates fell over 20 basis points and the stock market had the best week all year.

Stocks rallied 6% in a single week. That's seven months of historical market gains in five days.

But guess what? That's the magnificent 7-driven U.S. market, not the global market, and certainly not all individual stocks.

Incredible Bargains Are All Around Us If You Know Where To Look

Remember how for the last month, I've been pounding the table about the historic opportunity in real estate investment trusts, or REITs? How this sector has never before fallen more than 34% in a bear market outside of the Great Recession and Pandemic?

How never have REIT investors regretted buying REITs at these valuations, the best since 2009?

• 3 No-Brainer Sweet REIT Bargain Buys Yielding Up To 7%
• Don't Wait To Buy These 7% Yielding Sweet REIT Bargains
• My Oh My, 5 Sweet REIT Buys
• Run, Don't Walk To These 5 Sweet REIT Bargains
• It's The Best Time In 10 Years To Buy These Sweet REIT Bargains

Hear me now, quote me later: anyone buying REITs today will be thrilled in 5+ years." - Dividend Sensei, Nov 1st.

My oh my, how that call has aged well.

No, I don't have a crystal ball, I just know that if REITs have never in history fallen more than 34% outside of a financial sector meltdown, then REITs being down 34% with no financial meltdown in sight is the buying opportunity of a decade.

(Source: NAREIT.)

When an entire sector is priced for the apocalypse that is clearly not happening, it doesn't take a brave person to pound the table for a few weeks and point out this is a Buffett-style "greedy when others are fearful, wait for a fat pitch and then swing for the fences opportunity."

REITs still have a lot of coiled spring "juice in the squeeze" left, of course, but last week I discovered another generational buying opportunity that might even be once in a lifetime.

UK Stocks Are Ridiculously Cheap

UK stocks are dirt cheap, trading at 10X earnings, a 30% historical discount to their historical 13X.

Yes, the UK is messed up due to Brexit, and their stagflationary recession, and government disfunction and many other issues they face.

But let me put things in context for you.

The market has determined that UK stocks, due to all those headwinds are fairly valued at 13X earnings.

And today they trade at 10X.

That's like the S&P trading at 12.6X earnings vs. a historical bear market bottom of 13 to 15X since the 1970s.

I don't care how much government dysfunction you see in D.C., or how high rates are, or how bad the economy is: if you ever see U.S. stocks trading at 12.6X earnings, a 30% historical discount, you buy with both hands.

You don't wait, you just buy.

Unless the U.S. is done as a country and about to collapse forever, you likely will not regret buying U.S. stocks at sub 13X earnings, and you will almost certainly (97.5% according to Goldman) regret not buying at those prices.

Well, the same is true of the UK at 10X earnings.

According to S&P, there is a 96.5% chance that the UK is not doomed and that anyone buying UK stocks today is going to be very glad they did in 5+ years.

Here me now, quote me later, anyone buying UK stocks today is going to be glad they did in 5+ years." - Dividend Sensei Nov 6th.

Time stamp it, people, just like I called the REIT bottom I'm telling you that this is very close to the UK stock market bear market bottom.

I can't tell you if UK stocks will take off like a rocket within a week as REITs did, but I can tell you that no long-term investor in the history of the world has ever regretted buying UK companies for 10X earnings, and there is a less than 4% chance this is the first time they will.

How I Know That Today Is The Time To Buy UK Stocks With Both Hands

I don't have gut feelings, I follow the data, so let me prove to you the UK isn't falling into the sea.

This Isn't London In A Few Months...I Promise;)

For UK stocks to not recover historical 13X earnings in the future would require a permanent severe recession.

Yes, not just low growth, but negative growth at the rate of about -2% or -3% per year.

The UK's economy has barely fallen into recession.

And within 2 quarters it is expected to be growing again, though slowly.

Growth is expected to accelerate beginning in Q2 2024, and the UK stock market is priced as if England is falling into the sea.

OK, but what about inflation?! Maybe their high and persistent inflation is why their stock market is so weak. If inflation gets stuck at 7% forever, then that might justify a 10 P/E for UK stocks?

According to Bank of America and Ned Davis Research, for stocks to trade at 10X earnings forever, inflation would have to be 10% forever.

In the UK, prices are up 32% in the last 4 years, a horrific 7% annual inflation.

That's as bad as the U.S., and it's the average inflation rate of the 1970s.

But guess what? Inflation peaked in Dec of 2022 and has been falling steadily since.

The UK's 22% inflation rate in Dec of 2022 was the highest inflation rate of any developed economy so far in the great post-pandemic inflation boom.

While those prices aren't likely to start falling the rate of inflation is dropping at an average rate of 1.2% per month.

Does this seem like a country on the verge of collapse?

Where the stock market deserves to be trading cheaper than Japan's?

And at a 30% historical discount?

There is no fundamental reason for this outrageous discount in UK stocks, making it a once-in-a-lifetime coiled spring Buffett-style "fat pitch" buying opportunity.

Kind of like US REITs after they fall 34%;)

What About UK Stocks?

OK, so England's inflation is rapidly falling, and its economy isn't falling off a cliff. But what about UK stocks? Maybe the market is anticipating crazy new regulations or sky-high taxes? Maybe that's why earnings are dirt cheap?

You can see the effects of the recession in the slight decrease in earnings this year in UK stocks.

No cuts in UK dividends are expected, and the growth rate in earnings is expected to accelerate in 2024 and 2025.

Most likely in 2026 UK's GDP will grow around 2%, and growth will accelerate for 3 consecutive years starting next year.

Does this seem like a stock market that should be trading at a 30% discount?

UK company balance sheets are rock solid, with net debt/EBITDA ratios of sub 1.5 (3 or less safe according to rating agencies).

In fact, the average credit rating for UK companies is A, according to S&P.

Meanwhile, if you adjust for cash on the balance sheet (EV/EBITDA), as private equity always does, you find that UK stocks aren't trading at 10X earnings they are trading at 7X.

The average cash-adjusted P/E for Shark Tank in the first 10 seasons was 7.

Today private equity funds, billionaire sweetheart deals, are closing at 11X.

You can buy the UK stock market for 7X, a value that not even Bill Gates, Warren Buffett, or Mark Cuban can get today.

UK Stocks Expected To Deliver About 12% Long-Term Returns From Here

Morningstar's analysts think that UK stocks will deliver around 9% long-term growth for a total return of 12% to 13%.

That's Nasdaq-level returns because UK stocks are at generation lows. This truly is a once-in-a-lifetime opportunity for UK stocks.

But while the iShares MSCI UK ETF (EWU) is a fine choice for investors who don't want to pick stocks to cash in on this incredible opportunity, naturally, I know of much better companies for you to consider.

9 Of The Best UK High-Yield Blue-Chip Opportunities

Here's the bottom line up front about the best UK stocks right now.

Fundamentals Summary

• yield: 5.1% (3X S&P 500 and above SCHD or VYM)
• dividend safety: 78% safe (2.3% dividend cut risk)
• overall quality: 80% low-risk SWAN quality companies
• credit rating: A- stable (3.75% 30-year bankruptcy risk)
• long-term growth consensus: 8.2%
• long-term total return potential: 13.3% vs 10.2% S&P 500 and 12% UK stocks
• discount to fair value: 30% discount (potential Ultra Value "fat pitch" buy) vs 10% overvaluation on S&P
• 10-year valuation boost: 3.6% annually
• 10-year consensus total return potential: 5.1% yield + 8.2% growth + 3.6% valuation boost = 16.9% vs 10.1% S&P
• 10-year consensus total return potential: = 377% vs 160% S&P 500.

5% safe yield, with 8% long-term income growth and a potential 5X return within the next decade, more than double the S&P's consensus.

Here is how I have used our valuation tool to find the best Buffett-style blue-chip quality non-speculative aristocrat bargains today.

From 504 stocks in our Master List to the best UK dividend bargains.

• DK valuation tool (copy of our Master List used by members to connect to spreadsheets)
• sort by country
• 11 UK companies
• 1 overvalued (yellow color code)
• 1 speculative (junk bond rated, AY)
• 9 non-speculative good buys or better.

I've linked to articles for each company's investment thesis.

I've ordered these by largest to smallest discount to fair value.

1. British American Tobacco (BTI)
2. (SNN)
3. (OTCPK:LGGNY)
4. AstraZeneca (AZN)
5. Amcor (AMCR)
6. Unilever (UL)
7. Diageo (DEO)
8. Reckitt Benckiser (OTCPK:RBGLY)
9. LyondellBasell Industries (LYB).

Fundamentals Summary

• yield: 5.1% (3X S&P 500 and above SCHD or VYM)
• dividend safety: 78% safe (2.3% dividend cut risk)
• overall quality: 80% low-risk SWAN quality companies
• credit rating: A- stable (3.75% 30-year bankruptcy risk)
• long-term growth consensus: 8.2%
• long-term total return potential: 13.3% vs 10.2% S&P 500 and 12% UK stocks
• discount to fair value: 30% discount (potential Ultra Value "fat pitch" buy) vs 10% overvaluation on S&P
• 10-year valuation boost: 3.6% annually
• 10-year consensus total return potential: 5.1% yield + 8.2% growth + 3.6% valuation boost = 16.9% vs 10.1% S&P
• 10-year consensus total return potential: = 377% vs 160% S&P 500.

5% safe yield, with 8% long-term income growth and a potential 5X return within the next decade, more than double the S&P's consensus.

Consensus Total Return Potential Through 2025

• if and only if each company grows as analysts expect
• and returns to historical market-determined fair value
• this is what you will make.

British American Tobacco

Smith & Nephew

Legal & General

AstraZeneca

Amcor

Unilever

Diageo

Reckitt Benckiser

LyondellBasell

S&P 500

If the S&P grows as expected (no recession) and returns to historical fair value investors will see 13% returns in the next 2 years, just 6% per year.

In contrast, this 9 table-pounding, Buffett-style "fat pitch" UK blue-chips offer:

• 60% upside over two years = 5X more than the S&P 500
• 23% annualized returns, Buffett-like return potential from blue-chip bargains hiding in plain sight

Bottom Line: It's A Once-In-A-Lifetime Opportunity To Buy These Stocks

How confident am I that today is a great time to buy UK stocks?

Here me now, quote me later, anyone buying UK stocks today is going to be glad they did in 5+ years." - Dividend Sensei, Nov 6th.

I'll make the same table-pounding statement I did with REITs last week, right before the sector bottomed and took off into a 9% one-week rally.

I can't tell you when UK stocks will bottom and take off like REITs recently did, but here's what I can say.

Fundamentals Summary

• yield: 5.1% (3X S&P 500 and above SCHD or VYM)
• dividend safety: 78% safe (2.3% dividend cut risk)
• overall quality: 80% low-risk SWAN quality companies
• credit rating: A- stable (3.75% 30-year bankruptcy risk)
• long-term growth consensus: 8.2%
• long-term total return potential: 13.3% vs 10.2% S&P 500 and 12% UK stocks
• discount to fair value: 30% discount (potential Ultra Value "fat pitch" buy) vs 10% overvaluation on S&P
• 10-year valuation boost: 3.6% annually
• 10-year consensus total return potential: 5.1% yield + 8.2% growth + 3.6% valuation boost = 16.9% vs 10.1% S&P
• 10-year consensus total return potential: = 377% vs 160% S&P 500.

These 9 high-yield blue-chips have very little fundamental risk and are trading at dirt cheap valuations.

So cheap that analysts expect $1 invested today to become $4.77 in 10 years and potentially 60% returns in the next two years alone.

If you don't buy UK stocks today? Then you just don't want to own UK companies. But if you like these companies, then this is a once-in-a-lifetime opportunity.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

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