I’d buy these cheap UK shares today

Paul Summers picks out two cheap UK shares he’d be willing to snap up as the market’s mood swings continue.

| More on:

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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

I doubt I’m the only investor thinking that the last few weeks have been akin to wading through treacle. But on a positive note, it’s worth remembering that times like these can be the lifeblood of long-term Foolish investors looking for cheap UK shares to buy. Accordingly, here are two examples I’d have no issue adding to my portfolio today.

Lockdown beneficiary

In retrospect, the time to pick up stock in online casino and gaming operator 888 Holdings (LSE: 888) was just before Boris Johnson announced the first national lockdown. Back then, the share price was around 80p. A couple of months ago, 888 achieved a 52-week high of 494p. 

Unfortunately, I didn’t act on my own bullish call in 2020, due to the sheer number of attractively-priced options out there during the market crash. Even so, I’d still be prepared to buy now, especially as 888’s valuation has now fallen back below the 300p mark.  

Aside from general market skittishness, some old-fashioned profit-taking is probably behind this selling pressure. Some investors may have taken the 15% reduction in business-to-consumer betting revenue in Q3 as a sign that trading momentum is now slowing. A more likely catalyst, however, is the recent legal shake-up in the Netherlands that requires online betting firms to obtain a licence. In response, 888 has ceased to operate there — a decision that’s expected to hit profit by $10m. 

I’d snap up this cheap UK share

Since this is a temporary measure, I think the fall may be overdone. Shares in 888 now trade at just 14 times forecast FY22 earnings. That looks great value, considering 888’s agreement to buy William Hill’s non-US assets could put a rocket under profits in time. What’s more, the stock comes with a potential 12p per share dividend next year (or 4.1% yield at the current share price).

All this before we’ve even considered the increase in business 888 could see if there’s a fourth national lockdown.

Buy the dip?

Another cheap UK share I’m interested in buying would be commercial and domestic lighting firm Luceco (LSE: LUCE). Despite staging a brief comeback in November, shares in the mid-cap were back to 337p by last Friday. That’s a significant drop from the 52-week high of 513p it hit back in September. 

This fall leaves Luceco’s forecast P/E at a little under 16. This may not look like a screaming bargain initially. However, this number should never be looked at in isolation, especially if the company scores well on quality metrics.

While past performance is definitely no guide to the future, Luceco has long generated high returns on invested capital. It’s this, according to UK top fund managers like Terry Smith, that plays a significant role in great long-term returns. Luceco could therefore prove to be a steal at current levels.

I must emphasise the word could here. There is a chance that recent cost pressures may not peak in early 2022 as the company expects. The fact that less than half of the company is available to buy on the market (i.e. a low ‘free float’) may also mean the share price lurches rather than drifts lower.

Still, I’m not concerned with trying to time the market exactly. What’s more important to me is buying a decent business at a sane price and holding on. I remain bullish on Luceco.

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 assessed. Consider taking independent financial advice.

Paul Summers 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.

More on Investing Articles

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »