I won’t dispute that the Lloyds (LSE: LLOY) share price looks mighty attractive on paper. The FTSE 100 bank trades on an undemanding earnings multiple of 12 times for 2021. It carries a beefy 4.5% dividend yield at current prices too.
City forecasts are a useful guide to help UK stock investors decide what to buy and sell for our ISAs. But successful value investing is about more than just picking out low earnings multiples and big dividend yields. As I say, Lloyds looks very appealing on paper. The number crunchers expect the bank’s earnings to more than double this year. But in the real world, the FTSE 100 firm is a share I wouldn’t touch with a bargepole. Lloyds is very cheap for good reason.
Big trouble?
The obstacles facing Lloyds are numerous and colossal. A survey from the Financial Times suggests that the UK economy will take 18 months to recover to pre-pandemic levels. The reason why the survey’s 90-odd economist panel is so glum? Fears of a long Brexit- and coronavirus-related economic hangover.
This naturally bodes badly for cyclical companies with a high gearing to the British economy like Lloyds. The probability that Bank of England interest rates will remain around record lows for donkey’s years means further danger for UK banking stocks like this.
A better buy than Lloyds
While Lloyds is too risky for me in the current climate, I think Begbies Traynor Group is an ideal UK share to buy today. Demand for the services of insolvency practitioners like this balloons in times like these, as recent data shows.
According to The Gazette, a massive 3,126 businesses went into voluntary liquidation between July and October. This was up 52% from the corresponding 2019 period and the largest third-quarter total since 2000.
Today Begbies Traynor trades on a forward price-to-earnings (P/E) ratio of 17 times. It sports a 3.3% dividend yield too. And I think this represents very decent value for UK stock investors like me.
A FTSE 100 firecracker
I reckon gold producer Polymetal International (LSE: POLY) is another UK share in much better shape than Lloyds in 2021.
Firstly, huge concern over the outlook for the domestic and global economies should underpin strong demand for precious metals again this year. The low interest rates that threaten to crush profits at Lloyds and its peers will help gold prices significantly as well.
Indeed, inflationary fears due to loose central bank policy helped gold prices rocket on Monday. As I type, the yellow metal’s up 40 bucks at $1,940 per ounce. And gold could be poised for a fresh run to new record highs above $2,000.
Polymetal’s share price soared 40% in 2020 on the back of gold’s surge. Clearly, there are plenty of reasons for more hefty gains this year too. Today the FTSE 100 digger trades on a forward P/E ratio of just 10 times. It carries a mighty 7.8% dividend yield as well. At current prices, I think it’s worthy of serious attention from ISA investors such as myself.
