Amid the recent stock market turbulence, I have been looking for cheap UK shares to buy for my portfolio. I am not searching for just any enterprises. And I am not willing to buy a company just because it looks cheap.
I am looking for corporations benefiting from significant structural tailwinds. These should help them continue to report growth, no matter what the future holds for the global geopolitical environment.
With that in mind, here are my favourite cheap UK shares. I would buy both of these stocks for my portfolio today.
Educational market growth
The first company is education group Pearson (LSE: PSON). The enterprise focuses on providing learning materials for institutions around the world. This is a market that is only likely to grow in the decades ahead.
According to its latest results release, underlying sales grew 8% overall in 2021, primarily driven by an increase in demand for professional qualifications.
Management has also been pushing to move much of the business online, which has helped improve overall profitability and cash generation. Indeed, as a side effect of this, at the end of the year, the company had managed to reduce its net debt by around £113m to £350m.
However, Pearson’s business is not without challenges. This market is competitive, and the rising cost of living could push consumers to look elsewhere for cheaper educational materials. This is probably the most considerable risk to the company’s growth right now.
Still, with the stock trading at a forward price-to-earnings (P/E) multiple of 14.7, below its five-year average of around 17, I think the shares look undervalued, compared to the group’s potential.
One of the best cheap UK shares
As well as Pearson, I also believe Currys (LSE: CURY) is another business that looks undervalued compared to its potential.
After a couple of years of volatility, the group now appears to be getting itself back on track. Sales for the 10 weeks to 8 January increased 11%, compared to the same period in 2019. That is a notable improvement. It also shows that the demand for tech remains robust, despite the global supply chain crisis and high demand reported in 2020.
And we have to be aware of such challenges over the next 12-24 months. The supply chain crisis could hit the availability of products, while consumers may put off purchases if prices rise too much.
Even after taking these into account, I think the demand for electronics and electronic equipment will only grow in the years ahead. This is the primary reason I would buy the stock for my portfolio today.
It is also selling at a 2023 P/E ratio of just 6.4, which looks incredibly cheap, considering the company’s position in the UK and European electronics market. A potential dividend yield of 3.8% only sweetens the appeal for me.
