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3 cheap UK stocks I’d consider buying in September

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Buying cheap shares after a market crash is a tried and tested way of building wealth. With that in mind, today I’m going to take a look at three cheap UK stocks I’d considering buying in September before other investors catch on to the opportunity. I also like ITV at the moment, but my trio for today are all a world away from the television giant.

Three cheap UK stocks

Howden Joinery Group (LSE: HWDN) is one of the most successful UK corporations. Its success lies in rewarding individual store managers, who get to keep a portion of their profits. This means that while the company might face some decline in revenue in the near term, employees are highly incentivised to drive growth over the long run.

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That’s why I think this could be one of the best cheap UK shares to buy. Howden has a strong brand, a loyal customer base and incentivised employees. These factors could help the company ride the UK’s economic recovery over the next few years.

City analysts are expecting earnings per share to fall by around 50% this year before rebounding in 2021.

Despite this, and the company’s obvious competitive advantages, the stock continues to trade around 15% below the level at which it began the year. As such, it could be worth buying Howden as part of a basket of cheap UK stocks while it offers a margin of safety.

Renishaw

As cheap UK stocks go, I think Renishaw (LSE: RSW) stands out. 

This highly specialised and unique business provides industrial automation and motion systems for the engineering and healthcare sectors.

It’s a world leader in automated manufacturing systems, which gives the company a strong competitive advantage around the world.

Demand for Renishaw technology has exploded this year. Analysts are forecasting earnings growth of nearly 200%. Companies have rushed to automate their systems as coronavirus has impacted workforces around the world. I think this could give Renishaw years of revenue growth.

Therefore, despite the company’s premium valuation, from a long-term perspective, I think the business qualifies as one of the best cheap UK stocks.

It is currently dealing at a forward price-to-earnings (P/E) ratio of nearly 40, but there are only a handful of other companies that operate in the sector.

I think it is worth paying a premium for this business.

Bellway

Bellway (LSE: BWY) is set to benefit from the UK’s structurally undersupplied housing market in the years ahead. Despite this potential, investor sentiment towards the homebuilder is weak.

The stock is currently dealing at a forward P/E of 9.

I think this valuation deeply undervalues the company. For example, the rest of the housebuilding sector is trading at a P/E of 12. As such, I think the stock offers a wide margin of safety at current levels and qualifies as one of the best cheap UK stocks to buy now.

Bellway has also returned a healthy amount of cash to investors in the past through dividends. To conserve some money, the company has reduced its dividend this year, but I expect management to increase the payout next year when business returns to normal.

If the dividend is resumed at 2018 levels, investors can look forward to a 6.3% dividend yield on the current stock price.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Howden Joinery Group and Renishaw. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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