History shows us that buying cheap shares after a stock market crash is a great way to build wealth. With that in mind, today I’m going to take a look at two cheap UK shares.
Both of these companies appear to offer value after this year’s market decline. My calculations also show that these firms have the potential to yield substantial returns for investors in the years ahead.
Stock market crash bargain
The first company on my watchlist of cheap UK shares is technology group Aveva Group (LSE: AVV).
This company provides specialist engineering and design software solutions for the oil and gas, marine and petrochemical industries, among others. These are all highly specialised in markets, which gives Aveva a competitive advantage.
The company’s customers are likely to want to change their suppliers overnight as doing so may lead to some severe complications.
Aveva has been able to build on this competitive advantage over the past decade. As a sector leader, I think it is likely to continue to do so for many years to come. That helps the company stand out as one of the top cheap UK shares to buy now.
To complement its organic growth, the group recently announced it had inked an agreement to buy data management software firm OSIsoft $5bn. Management believes the deal will strengthen the company’s overall position in the industrial software sector.
However, despite Aveva’s competitive advantages, the company looks cheap after the recent stock market crash.
Shares in the technology group are changing hands at prices around 10% below the level at which they began the year. This suggests the company offers a margin of safety at current levels. As such, it could be worth buying the stock as part of a diversified basket of cheap UK shares today.
Cheap UK shares
I think it could also be worth taking a closer look at paper products manufacturer Smurfit Kappa Group (LSE: SKG) after the recent stock market crash.
It looks as if Smurfit could be one of a handful of companies that will benefit from the coronavirus crisis. Recent trading updates from the group show that it has benefited from the boom in e-commerce over the past six months.
Many analysts believe the retail market will never return to its pre-pandemic state, where brick-and-mortar stores ruled. Nearly half of retail sales are now completed online, and it looks as if this trend is here to stay.
Therefore, it seems as if Smurfit may see rising demand for its paper and packaging products in the years ahead.
On this basis, I think the stock is worth buying as part of a portfolio of cheap UK shares today. The stock is currently trading at a forward price-to-earnings (P/E) multiple of around 15, which is below its long-term average.
On top of this, Smurfit has consistently returned around half of its earnings to investors via dividends. When the pandemic is finally in the rear-view mirror, I reckon it’s likely this trend will continue.
