2 cheap UK shares to buy in October

With UK share prices falling recently, Harshil Patel considers some potential bargains for his portfolio this month.

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Today I’m looking at good-quality UK shares that have fallen in price in recent weeks or months. Shares can fall for a number of reasons. It can be related to wider economic issues, industry-wide concerns, or company-specific news. Sometimes shares can also fall if market sentiment temporarily turns lower.

UK mid-cap shares seem to have fallen quite a bit recently. Despite gaining around 25% over the past year, the FTSE 250 index has dipped by around 8% in just a few weeks. I reckon there could be some bargains around for my portfolio. Let’s take a further look.

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Top quality UK shares

Games Workshop (LSE:GAW) is a phenomenal company, in my opinion. It’s a Nottingham-based manufacturer of fantasy miniatures that it sells all over the world. It’s well-run, and benefits from fantastic returns and profit margins.

It owns a substantial universe of intellectual property (IP) with hundreds of different characters. In addition to the games and miniatures, it has been partnering with game and TV companies to monetise its IP. Royalties earned from this are highly profitable.

The company has been expanding its warehouse capacity recently. I reckon this is a good sign and shows management planning for a brighter future.

After a phenomenal 84% share price return in 2020, performance over the past year has been more muted. This mid-cap share is now down by almost 10% over the past 12 months. That said, recent share price weakness is an opportunity to snap up this business at a bargain price, in my opinion.

Bear in mind, there is an issue currently affecting many manufacturers. That is rising costs from materials, transport and wages. Whether this is temporary or persists for longer is a factor to watch. In addition, it remains to be seen if ‘lockdown customers’ become ongoing customers.

Overall, there’s much to like about these quality UK shares. With a 64% return on capital, and 40%+ profit margins, I’m impressed.

I’d buy IT

Another good quality mid-cap share that I’d consider is Computacenter (LSE:CCC). This 40-year-old UK business saw sales growing by almost 30% in the first half of the year, driven by performance in North America and Germany.

Looking ahead, CEO Mike Norris sounds upbeat too. “Customer demand is strong, we have record order backlogs,” he has said.

I’d say that it’s an experienced player in the IT infrastructure sector. Its earnings are growing, and it even offers a 2% dividend yield.

There’s something I need to be aware of, however. Supply shortages that have affected many companies including Computacenter are worrying. The industry-wide issue could last well into 2022 and could create some pressure on costs.  

That said, these issues should be temporary. And Computacenter’s established business should be able to manage this challenge. Overall, I reckon the shares are cheap and I’d consider buying them this month for my Stocks and Shares ISA.

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Harshil Patel owns shares of Games Workshop. The Motley Fool UK owns shares of and has recommended Games Workshop. 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.

Should you invest the value of your investment may rise or fall and your Capital is at Risk. Before investing your individual circumstances should be considered, so you should consider taking independent financial advice.

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