History says I would regret not buying UK shares when they are this cheap

UK shares have been absurdly cheap for years now. We can argue until the cows come home about why that is. Brexit? A sluggish domestic economy? Lack of UK tech sector? Or all of the above?

Whatever the reason(s), the fact that high-quality stocks are undervalued relative to global peers is certainly an opportunity for patient, long-term investors.

Investment banking analysts Goldman Sachs recently pointed out that the entire industrial sector FTSE 100 “you trade at a discount“. Every industry!

I have to think that this situation cannot go on forever. Even the long-overlooked Japanese stock market has made a comeback in recent years. History suggests that UK stocks could experience a similar rebound.

A strange anomaly

It is important to remember that global firms listed in the UK are fundamentally less vulnerable than their overseas counterparts. Quite the opposite in some cases.

So the low prices just reflect the broader market sentiment rather than the actual performance or strength of these companies.

This low valuation creates opportunities for investors like me to buy high quality stocks at a discount. Many offer market share returns backed by strong cash flow.

Mid-cap stocks look attractive

It's not just a blue-chip index though. Goldman Sachs says the FTSE 250 stocks also look attractive for a number of reasons:

• Valuations: many trade at low valuations compared to global peers
• Economic recovery: medium-sized companies are benefiting from the improving UK economy and reduced demand due to surprisingly high domestic savings.
• Interest rates: lower interest rates are expected to continue to support growth in the FTSE 250
• Currency: A strong pound favors FTSE 250 companies, many of which are domestically focused
• Supply-side reforms: government reforms in sectors such as housing should improve efficiency

A contribution worth considering

One FTSE 250 stock that looks set to benefit from many of the factors mentioned above Bellway (LSE: BWY).

The housebuilder is well positioned to take advantage of the new government's efforts to overhaul the planning system. This is an important step to tackle the UK's chronic housing shortage and Labor plans to build 1.5m homes over the next five years.

Additionally, as interest rates fall, mortgage affordability will improve, stimulating demand for new homes. This would give a good boost to Bellway's business.

Yes, like all home builders, the company has had a tough time lately. In the 12 months to 31 July, revenue was £2.3bn, down from £3.4bn a year earlier. The base operating margin is expected to decrease from 16% to 10%. Housing completions fell from 10,945 to 7,654.

Further declines in earnings are a risk in the near term, and further increases in supply chain inflation could hurt profits.

Looking ahead, however, CEO Jason Honeyman is optimistic. In August, he said: “An improved trading environment, combined with the strength of our store opening program, created healthy growth in the year-end order book. As a result, we are firmly positioned to return to growth in fiscal year 2025.”

In the medium term, Bellway's exposure to domestic economic recovery, favorable interest rate movements, and government reforms make it a stronger candidate than the FTSE 250.

So, it might be a stock worth considering, in my opinion.