UK share markets were jam-packed with bargain stocks before last week’s mini stock market crash. The fright that investors received after news of the Omicron coronavirus variant last week has left even more top companies at prices I’d consider too cheap for me to miss.
TI Fluid Systems (LSE: TIFS) is one I’m thinking of loading up on for my Stocks and Shares ISA following recent price weakness. In fact it’s a UK share I already own, one I purchased to try and make the most of the electric vehicle (EV) revolution. This business produces all sorts of fluid-carrying components that major autobuilders need. And encouragingly pure-play EVs and hybrid vehicles require far higher loadings of this tech than cars with internal combustion engines.
Riding the EV revolution
Demand for EVs is soaring as consumer concerns over the climate crisis worsen. It looks set to continue rocketing too. The International Energy Agency (IEA) reckons there will be 145m EVs on the world’s roads by 2030. That compares with the 11m in existence last year. And major carmakers are doubling-down on spending in this area to grab a slice of the action (not to mention enhance the green credentials of their brands).
Japan’s Nissan is the latest major name to announce plans to turbocharge investment in EVs. The carmaker will invest ¥2trn over the next five years and bring out 23 electric models by 2030, it announced on Monday. The rewards for TI Fluid Systems, which already supplies parts to Nissan, could be huge as carmakers steadily make the switch from traditional engines.
Supply chain strains
Like many other UK shares, the TI Fluid Systems share price just closed at its cheapest for more than a year on fears over the Omicron variant and what this could mean for car demand and automotive supply chains.
In truth though, worries over supply chain issues in the industry — and what this could mean for TIFS’ product in the near term — have been steadily growing for some time. Consequently the company’s price has been locked in a downtrend since the end of the summer. A near-20% decline in light vehicle production between July and September dragged revenues 14.7% lower at constant currencies.
Too cheap to miss?
It’s my belief, though, that this weakness represents a great dip buying opportunity. At current prices of 221p per share this cheap UK share trades on a price-to-earnings (P/E) ratio of just 9.2 times for 2022. TI Fluid Systems also offers up a meaty 3.1% dividend yield for next year. This smashes the broader forward average of 2% for FTSE 250 shares.
Its true that profits could disappoint if shortages of key parts continue to hit car production. Some industry experts, like the head of Mercedes-Benz, have suggested the problem could persist into 2023. Still, I think the firm’s brilliant long-term outlook — one closely tied to the EV revolution — still makes it one of the best cheap UK shares for me to buy today.
