2 UK stocks to buy now at 52-week lows

Which stocks are the best to buy now? The recent market rally has lifted many shares back to the same value, in my view. I don’t see as many offers as I did a few months ago.

One technique I like to use in this situation is to look for stocks that are trading close to their 52-week high. This usually underperforms the market for a number of reasons, but now it may be close to a turning point.

The latest trawl through the market has unearthed two possible bargain buys.

Affordable treats

The first choice is liquor Nicholas (LSE: NICL), the owner vimto brand. It is popular in the UK, but also has a large following in some overseas markets, particularly the Middle East and Africa.

Sales have been hit hard by pandemic restrictions on pubs and restaurants. But the out-of-home market is now back to normal. Nichols also has plans in the pipeline that management believes it can deliver “important opportunity” for more profit.

For me, this company has two big attractions. One is a defensive business, selling affordable products that many people buy regularly.

Vimto’s strong brand has supported double-digit profit margins over the years. Until the pandemic, Nichols’ dividend had not been cut in 30 years.

The second attraction is a family business with conservative finances. At the end of December, the company reported a net cash position of £56m – equivalent to 15% of the current share price.

Of course, there is always the risk that Nichols’ best days are behind him and that he will continue to suffer from a lack of growth. I’m not sure this won’t happen, especially in today’s tough economic climate.

The future is always uncertain. But on balance, I think the proven quality of this business should drive its success. In my view, Nichols stock could be a good long-term investment at current levels.

A 5.5% reliable income

My second choice is very different. FTSE 250 group of properties LXi REIT (LSE: LXI) specializes in owning properties with very long leases.

The majority of the group’s portfolio consists of budget hotels (Travelodge/Premier Inn), theme parks (including Alton Tower and Thorpe Park), private hospitals, and supermarkets.

Overall, the LXi portfolio has 80 tenants, with a weighted average of 27 years to the first lease break, or expiration.

The management has done some refinancing this year, which I think has reduced the risk of future problems. However, the company has not avoided its mistakes.

LXi’s share price fell in September after the company announced a £500m deal to buy 18 Sainsbury’s supermarket. Financing the deal would require a sizeable share issue as well as new debt.

LXi later backed out of this deal, but the stock price has yet to recover. However, three directors have bought more than £800,000 worth of shares since then. This indicates that they believe the stock offers value at current levels. I agree.

A nasty UK recession may have affected some of the LXi’s key tenants. But on balance, I think this situation looks like a good bet for long-term income. With a forecast yield of 5.5%, I am tempted to add LXi to my own portfolio.