2 UK stocks have been knocked down and should be considered for an ISA before they recover
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Investing in UK shares before the recovery can unlock incredible returns for investors. Just ask anyone who has bought one Rolls-Royce the stock is back in early 2023.
For those who missed it, i FTSE 100 The engineering giant has developed a gravity-defying transformation that has generated over 1,200% profit in just three years, turning £5,000 into £67,300!
The good news is that, even after the delivery of strong returns in 2025, the FTSE 100 is still full of potentially profitable British turnaround opportunities. And there are two that professional analysts have recently highlighted Diageo (LSE:DGE) and Barratt Redrow (LSE:BTRW)
So should investors rush to buy these shares within an ISA today?
Diageo – down 55% in three years
Shares of the world’s largest spirits company have taken a hit since the tragic death of its longtime CEO in 2023.
A combination of his successor’s missteps, weak demand in key markets such as the US and China, and a general decline in consumer drinking habits have all hit the business hard. And as a result, Diageo’s stock price has been gradually sold off, with its market-cap more than halved.
That obviously affects and frustrates shareholders today. But the tide may finally be turning. Earlier this month, Sir Dave Lewis stepped in as the new CEO – a leader whose CV is full of successful turnarounds, including Tesco.
Cost reductions, renewed pricing discipline, and portfolio optimization efforts are already underway. And with further increases expected from low interest rates, the stage seems set for Diageo to begin what could turn out to be a surprising recovery story.
Barratt Redrow – down 50% from 2022
Since merging with Redrow in 2023, Barratt Redrow is now the UK’s largest housebuilder. But sadly, size hasn’t protected it from the wider storms plaguing the UK’s residential construction sector.
Higher interest rates have increased loan rates. At the same time, inflation sharply increased both material and labor costs, putting pressure on profits. Throw in growing fears of a possible recession, and it’s not so surprising that the housebuilder has seen its share price fall by 50% in just over four years.
But like Diageo, 2026 could be the turning point investors have been waiting for.
Further reductions in interest rates will likely be followed by a corresponding reduction in mortgage rates, helping to increase home affordability and, in turn, demand.
At the same time, supply chain changes and the withdrawal of the British planning permission process may also result in new growth across the sector, particularly for companies such as Barratt that sit on the world’s largest banks.
An important point
None of these businesses are guaranteed to deliver a successful turnaround in 2026. And even if he does, there is no guarantee that he will be the next ‘Rolls-Royce’.
However, with the market prices of both companies at obscenely cheap valuations, investor expectations appear to be very low right now. And as a contrarian stock picker, that makes both stocks look interesting. That’s why I think they deserve a closer look today. And it’s not the only conversion game I have my eye on right now.
