Are these the best UK shares to watch in January 2026?

Best UK shares to watch

UK stocks continue to enjoy a good year overall, making solid gains at the index level, and managing to compete effectively with US indices for a change. With the Budget out of the way and the Bank of England (BoE)  having cut rates once more, investors can feel more confident about the outlook for the UK economy, if not wildly optimistic.

Worries about consumer spending remain of course, and a broader market downturn is a distinct possibility, but with global economic growth still solid and a US recession not yet on the horizon, the overall picture suggests UK assets are well-placed as 2025 gives way to 2026.

Open an account and trade some of the best UK stocks now

1. JD Sports
2. Fresnillo
3. Domino's Pizza
4. Pets at Home

Top value stocks

Value: JD Sports (JD.)

JD Sports trades on a price-to-earnings (P/E) of 8.5, around 49% below its five-year average. That's a significant de-rating for a business that was once a market darling, reflecting concerns about the sustainability of its growth model and exposure to discretionary consumer spending.

The sportswear retailer faces genuine headwinds. The cost-of-living squeeze has hit footfall, promotional intensity has increased, and the US expansion that once excited investors has proven more difficult than anticipated. Margins are under pressure, and there are questions about how differentiated the offering really is in an increasingly competitive market.

To be fair, JD Sports still has a strong market position in the UK and benefits from relationships with key brands like Nike and Adidas. The business generates cash and has scope to improve operational efficiency. But the glory days of rapid expansion and multiple re-ratings look over.

The valuation reflects caution rather than distress. If consumer spending stabilises and the company can demonstrate improved execution in the US, there's room for modest upside. But retail remains a tough sector, and investor enthusiasm has clearly waned.

JD Sports weekly candlestick chart

Top growth stocks

Growth: Fresnillo (FRES)

Fresnillo PLC trades on a PEG ratio of 0.38, suggesting the market is pricing in much faster earnings growth than the valuation implies. A PEG below 1.0 typically signals potential value, particularly in cyclical sectors like precious metals mining.

The Mexican silver and gold producer benefits from elevated precious metal prices, driven by geopolitical uncertainty and safe-haven demand. Production volumes have been decent, and the company has a long reserve life supporting future output. Cost discipline has improved, helping margins even as operational challenges persist.

That said, mining in Mexico comes with risks. Security concerns, regulatory uncertainty and community relations can all impact operations. Capital intensity remains high, and any pullback in gold or silver prices would quickly impact earnings and the investment case.

The low PEG suggests the market is sceptical about sustained earnings growth or concerned about execution risk. If precious metal prices hold up and operational delivery improves, the shares could re-rate. But mining stocks rarely trade on premium multiples for good reason, and country-specific risks add another layer of uncertainty.

Fresnillo weekly candlestick chart

Top dividend stocks

Dividend: Domino's Pizza (DOM)

Domino's Pizza offers a dividend yield of 6.4% with cover of 2.1 times, making it one of the more attractive income plays in the consumer discretionary space. That level of cover provides reasonable comfort that the dividend is sustainable, even if earnings come under pressure.

The pizza delivery chain has faced headwinds from rising input costs, wage inflation and increased competition from aggregator platforms. Like-for-like sales growth has disappointed, and the once-reliable store opening programme has slowed. Investors who remember the days of consistent upgrades have been left frustrated.

However, the business still generates strong cash flow, maintains market leadership in the UK, and benefits from an asset-light franchisee model. The dividend looks affordable based on current earnings, and management remains committed to returns to shareholders.

The yield reflects diminished growth expectations rather than dividend risk. For income-focused investors, that 6.4% yield with decent cover looks reasonable. But don't expect much capital appreciation unless the company can reignite like-for-like growth. It's an income story now, not a growth story.

Domino's Pizza weekly candlestick chart

Dividend: Pets at Home (PETS)

Pets at Home yields 6.2% with dividend cover of just 1.2 times, making this a higher-yielding but less secure income proposition than some peers. That thin cover means there's limited room for error if earnings disappoint.

The pet supplies retailer benefited enormously from the pandemic pet boom, but growth has normalised as those tailwinds faded. The shift to online shopping has pressured store-based sales, and increased competition from supermarkets and specialists has made the market more challenging. Vet services provide some diversification, but growth there has also slowed.

To be fair, pet ownership tends to be resilient through economic cycles, and customers generally prioritise spending on their animals. The business generates cash and has a strong market position. But the low dividend cover is a concern, particularly if trading conditions weaken further.

The yield looks attractive on the surface, but that 1.2 times cover leaves little margin for safety. Income investors need to weigh the higher yield against the increased risk of a dividend cut if profits come under sustained pressure.

Pets at Home weekly candlestick chart

How to invest or trade in UK shares with us

1. Learn more about UK shares
2. Decide whether you want to trade or invest
3. Open an account with us or practise on a demo
4. Search for your chosen share on our web platform or app
5. Make your investment or trade

​When you invest in shares, you buy them outright and become a part-owner of a company, with the goal of building wealth over time.

​Trading takes a shorter-term approach using leverage, allowing you to take larger positions for smaller initial deposits—amplifying both profits and losses. Always ensure you understand the risks before trading.

For example, if you trade with 5:1 leverage, you could manage a £5000 position by placing a £1000 deposit. A 10% market shift could result in 50% profit or loss on your initial margin.

Although negative balance protection stops you from losing more than your initial deposit, market movements are unpredictable, and you could still lose your full deposit.

Top shares to watch summed up

​These five companies represent a mix of high-yield dividend opportunities, structural growth stories and undervalued plays as the UK market transitions toward lower interest rates. Remember, all investments carry risk—always do your own research and consider your financial objectives before taking a position.

​Trade and invest in over 17,000 UK, US and global shares from zero commission with IG, the UK’s No. 1 trading provider.