The 2021 economic recovery is starting to lose momentum. Covid-19 infection cases are rising again on a worldwide basis, meaning that pandemic lockdowns and travel restrictions are persisting (and in some places returning). Supply chain problems and runaway inflation are also taking a bite out of global GDP. Is now really the time to go shopping for cheap UK shares?
Well, the bumpy economic rebound isn’t affecting my personal appetite for UK shares. Economic recoveries never go in a straight line following macroeconomic, geopolitical or social crises. And there are still many British stocks out there in great shape to deliver decent shareholder returns, even in this climate.
In addition, there are stacks of cheap UK shares whose valuations (in my opinion at least) reflect the possibility that near-term earnings forecasts could be blown off course. Here are what I think are two of the best low-cost stocks I’d buy right now.
A cheap UK retail share on my radar
The amount that people spend on their pets has risen strongly in recent years. According to Statista, consumer expenditure on pets and related products in the UK rocketed 170% between 2005 and 2020. Soaring animal adoption rates in response to the rise of homeworking following Covid-19 mean that spending in this area is likely to keep growing healthily too.
This bodes well for Pets at Home (LSE: PETS), a cheap UK retail share that sells essential and non-essential products for our four-legged friends. It also provides grooming and veterinary services in a number of its 450+ stores. Like-for-likes sales at the business soared 30.2% year-on-year in the 16 weeks to 15 July, latest financials showed.
Pets at Home faces significant supply chain disruptions due to global container shortages and Brexit-related trade friction. Furthermore, it also faces pressure from labour market shortages, and in particular at its vets business. Still, in my opinion, these threats are baked into the company’s share price today. City analysts think earnings here will jump 49% in the 12 months to March 2022. This UK share consequently trades on a forward price-to-earnings growth (PEG) figure of just 0.5.
7.2% dividend yields!
I believe that Sylvania Platinum (LSE: SLP) is another ideal British stock for these uncertain times. This is because demand for the precious metals it mines rises during tough economic times as interest in safe-haven assets increase. Conversely, sales of its platinum group metals (PGMs) also increase when economic conditions pick up and demand from the automotive industry rebounds.
City analysts aren’t expecting earnings at Sylvania Platinum to surge in this financial year to June 2022. A modest 1% bottom-line increase is currently predicted. Still, I think current predictions make the mining giant a highly-attractive cheap UK share to buy. It trades on a modest price-to-earnings (P/E) ratio of just 3 times. At current prices it sports a giant 7.2% dividend yield as well. These make it a great buy for me, despite the complex nature of metals production and the associated risk to profits.
