The Motley Fool

I’d buy these 2 undervalued shares today

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Piggy bank group pastel color background
Image source: Getty Images

I’ve been scouting for undervalued shares to add to my portfolio. There are a couple of business that appear to me to be so cheap, I think it would be a mistake to pass them up. 

Undervalued shares on offer 

I should start by saying that just because I believe these companies are undervalued, it does not mean they will generate positive returns.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

Buying stocks at depressed prices can be a good investment strategy, but it is not suitable for all investors. However, I’m comfortable with the level of risk involved. That’s why I follow the strategy.

The first company on my list of undervalued shares is N Brown (LSE: BWNG).

Thanks to its online business, this fashion company is projected to escape the worst of the pandemic. According to City projections, net income totalled £27m in 2020 and could rise to £30m in 2021. These projections put the stock on a forward price-to-earnings (P/E) multiple of 7.6. I think that looks cheap compared to the market average of 16. Of course, analysts’ forecasts can change as events develop.

Some investors might believe this company is cheap for a reason. The fashion industry is incredibly competitive, and just because N Brown has survived until this point does not mean that it will continue to do so. 

Still, I think the stock’s valuation outweighs the risks of investing. That’s why I would buy it for my portfolio of undervalued shares. 

Recovery play

I would also buy shares in H&T (LSE: HAT) for my recovery portfolio of undervalued shares. 

The company, which offers a range of services such as gold purchasing, pawnbroking, personal loans, and retail shops, has experienced steady growth over the past five years.

Revenues declined last year as non-essential retailers were closed, but I think that could change as we advance. Indeed, the City is expecting revenues to return to near 2019 levels by 2022. These are just projections at this stage. 

Nevertheless, I’m encouraged by the company’s growth track record. It also entered the pandemic with a robust and debt-free balance sheet, which has enabled it to weather the storm. It will also provide financing for the group after the crisis to fund expansion. At the end of 2020, the firm had £35m of net cash to support its customer lending business and provide capital for reinvestment. 

The main risk the company faces today is the potential for a clampdown on its lending activities. A large number of high-interest lenders have collapsed over the past few years as regulators have taken a hard line with these businesses. H&T will not be immune to regulatory action. A sudden fall in the gold price may also reduce demand for its gold buying service. Profits at this service jumped 19.3% to £6.8m last year. 

Even after taking these challenges into account, I would buy the stock for my portfolio of undervalued shares. I believe it has great potential in the years ahead. 

The high-calibre small-cap stock flying under the City’s radar

Adventurous investors like you won’t want to miss out on what could be a truly astonishing opportunity…

You see, over the past three years, this AIM-listed company has been quietly powering ahead… rewarding its shareholders with generous share price growth thanks to a carefully orchestrated ‘buy and build’ strategy.

And with a first-class management team at the helm, a proven, well-executed business model, plus market-leading positions in high-margin, niche products… our analysts believe there’s still plenty more potential growth in the pipeline.

Here’s your chance to discover exactly what has got our Motley Fool UK investment team all hot-under-the-collar about this tiny £350+ million enterprise… inside a specially prepared free investment report.

But here’s the really exciting part… right now, we believe many UK investors have quite simply never heard of this company before!

Click here to claim your copy of this special investment report — and we’ll tell you the name of this Top Small-Cap Stock… free of charge!

Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.