There has been a lot of good news for investors lately. Many UK share prices have soared in recent weeks. But I still think the UK market looks undervalued. There remain some excellent bargains for long-term investors, in my opinion. Here are five cheap UK shares I would buy now.
Cheap UK shares with favourable business trends
I like the self-storage business model in general. Once people store items they often leave them for longer than they expect, paying rent each month. It’s a straightforward, consistent, predictable business with strong cashflows.
A UK-listed storage provider I would consider buying is Safestore. A simple look at its share price history chart shows how it increased strongly over many years. This year the shares fell, but the business continues to do well. Its most recent quarterly update saw like-for-like revenue growth of 2%. It has continued paying dividends, even increasing its interim payout by 7%. Given its long-term growth prospects, I think Safestore shares are cheap.
Shares in brick manufacturer Ibstock continue to languish. They are down more a third on the year even after a strong performance in November. But as one of the leading brickmakers in the kingdom, I expect the company to benefit from ongoing strength in the building market. It saw strong business recovery in the third quarter. With a price-to-earnings ratio of just 11, Ibstock is one of the cheap UK shares I’d buy.
Big names on discount
One can also find attractively priced shares among bigger names at the moment.
High street bank Lloyds rallied strongly in November. I think that could be just the start of a sustained repricing for the financial services powerhouse. Debt defaults are lower than feared, and mortgage business is strong. Once dividends restart at some future point I expect further share price increase. I’m considering getting in now to benefit from any increase before then.
The vaccine news has cast a light on some leading pharma names. Meanwhile, Brentford-based GlaxoSmithKline looks unloved. Its price-to-earnings ratio of 11 and yield approaching 6% look attractive for such a well-established medicine and consumer goods manufacturer. Unlike some cheap UK shares, GSK has a long, successful history. I expect it will do well in the future. That is why I would buy the shares for the long term at this price now. It is a blue chip name with a generous yield and those are rare.
Finally, insurer Legal & General continues to look like good value. The shares have risen handily in the past few months. I still think they look cheap, though. The well-run business is trading on a single digit P/E. Its yield of almost 7% is attractive. Whereas competitor Aviva recently announced plans to cut its dividend by a third, Legal & General is committed to increasing dividends over the next five years.
A solid business, attractive dividend, and transparent payout plans mean I like Legal & General as a share to tuck away for years to come. That’s why I chose it for my own portfolio.
