Three overlooked British stocks to buy now

Each week, a professional investor tells MoneyWeek where he'd put his money now. This week: Alex Savvides, fund manager, JOHCM UK Dynamic Fund.

I focus on firms undergoing changes that are often poorly understood or neglected by the stock market, and my three picks reflect this.

My first pick is a waste-management company which had until recently been undermined by a mixture of a weak market, poor spending decisions by a growth-obsessed management team, and balance-sheet worries. The first signs of change came at the end of 2011, with the appointment of a new CEO.

The 2012/2013 fiscal year was still a torrid one for Shanks (LSE: SKS) Europe's economic woes and over-capacity in the Benelux and UK solid-waste markets led to two profit warnings. But signs of a more disciplined approach came with a £20m cost-cutting drive, designed to take capacity out of Shanks'Benelux solid-waste business.

Since then, the majority of Shanks's UK solid-waste assets have been sold to Biffa, and it has decided to leave the business in the UK, further evidence that it's now being managed with a tighter focus on return on capital.

This decision to slow down growth investment and only invest in the highest-return projects will have long-term profit and cash-flow benefits. Meanwhile, the low carrying valuation of Shanks's PFIequity portfolio gives further support.

Infrastructure group Balfour Beatty (LSE: BBY) suffered two profit warnings in six months in late 2012 and early 2013. Weakness in its UK regional construction business was compounded by shortfalls in its Australian unit, the ongoing downturn in US construction, and weakness in its European rail businesses.

This all reduced the group's cash flow and dividend cover, prompting concerns about the dividend's sustainability. But management's reaction has been swift.

In the UK regional construction business the CEO has been changed, some offices are being closed and a new contract bidding mechanism implemented. In Australia short-term uncertainties persist, but cost-saving initiatives are underway and the business is expanding into other areas of infrastructure work.

The European rail businesses have been sold, as have various PFI equity stakes at substantial premiums to book value, and also the non-core UK facilities management business.

Finally, in America there are early signs of recovery in the order book. These signs of progress suggest the dividend will be held in the short run and that ultimately the group can recover and grow its earnings.

Mining company Anglo American (LSE: AAL) has underperformed for years, due to mismanagement, poor spending decisions and weak productivity, notably in its platinum unit, where it is embroiled in a protracted wage dispute with mineworkers. But it is vital to try and understand not just what firms look like today, but what they might look like in the future.

CEO Mark Cutifani, appointed last January, has been given a broad mandate for change. The turnaround plan is centred on generating higher profit margins, better returns on capital employed, and more cash.

This will be done in four stages: a remodelled exploration process; productivity gains; improved marketing practices to capture better pricing; and a tighter capital-allocation process, which is likely to result in some asset sales.

This is a multi-year project, but nearly a year into Cutifani's tenure, there are already early signs of success. This is an interesting restructuring situation in a firm that looks cheap. Scepticism among City analysts and investors means any turnaround could see the shares rapidly repriced.