The market is ignoring three strong British stocks

Columbia Threadneedle Investments fund manager Dominic Younger identifies three cheap British stocks that he would invest in

British stocks have reached new highs in 2026 against an uncertain global backdrop, demonstrating once more how resilient the UK is in comparison to other developed markets. As value investors with a contrarian mindset, we firmly believe that "price is what you pay, value is what you get." The UK's outperformance can be attributed to both its preponderance of resilient, cash-generating businesses and the modest initial valuation of many of its companies. It's one of the reasons the UK is still a great place to find cheap stocks that have lost favor with investors but have the potential to yield significant risk-adjusted returns for those who are prepared to adopt a longer-term perspective. Here are three examples of companies that we believe the market might be missing.

Croda, a British stock with contrarian appeal, is a specialty chemicals company (LSE: CRDA). The company's former world-class reputation and track record of high margins, strong growth, and appealing returns were undermined by a number of problems, and the shares are emerging from a period of severe underperformance. High levels of investment in innovative new pharmaceutical-oriented capabilities have not yet paid off, and end markets have proven difficult. However, over time, we have come to believe that this company is far from broken and that significant gains in profitability are possible thanks to an aggressive cost-cutting initiative, well-invested assets, and rebounding demand. While they wait, investors can anticipate a market-beating yield of over 4%.

Another British stock that we believe has reached a price that significantly undervalues the company's inherent value is Communications Group WPP (LSE: WPP). The company is merging under new management in order to take advantage of the exceptional talent and technological capabilities at its disposal. The company has led the market in acquiring new business for the past two quarters after a period of prolonged underperformance against a challenging market backdrop. In the advertising and marketing industry, where scale and data are crucial, this confirms our belief that WPP has made a turnaround and revitalized its competitiveness. There is ample cash on the balance sheet, which gives the company options, and there is unmistakable evidence that the business is making significant progress in changing the group's structure. Investors will be well compensated for the risk because the shares are trading on a remarkably low price/earnings ratio of less than five times and offer a yield of well over 6 percent for the upcoming year.

BFIA's current problems. Under the direction of a seasoned team, Chesnara (LSE: CSN) is a lean, well-run insurer that specializes in purchasing closed life insurance books, frequently at significant discounts to book value. These acquisitions produce consistent, long-term cash flows that are supported by strict cost control and a track record of maximizing business synergies. As a result, Chesnara has the best track record of consistent growth in UK and European insurance, with a dividend that increases annually. Last year, a game-changing acquisition for HSBC's UK Life division propelled the company into the FTSE 250 and resulted in a one-time 6% dividend increase. Chesnara stands out as an appealing income play that many won't have thought of, with more deals in sight, a cautious balance sheet, and a yield of more than 8%.

Sometimes it doesn't take much for sentiment to start improving when a company loses favor. Although there is some risk associated with these British stocks, patient investors may eventually see large returns.