Best shares to buy now: 2 cheap stocks I’m buying without delay!

Could a cheap copper miner and an oil producer be some of the best shares to buy now for my long-term portfolio?

| 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.

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.

Key points

  • These two companies may be undervalued when comparing P/E ratios with competitors
  • Antofagasta has a compound annual EPS growth rate of 13.4%
  • Tullow Oil’s year-end net debt fell to $2.1bn, from $2.4bn the previous year

With recent market volatility, I’m on the hunt for the best shares to buy now. In doing so, I’m looking at the deeper financial state of companies instead of recent price movement. These two firms, engaged in copper mining and oil respectively, have strong underlying results and may be cheap. Should I add them to my portfolio? Let’s take a closer look.

One of the best shares to buy now: Antofagasta

A copper mining business operating in Chile, Antofagasta (LSE: ANTO) is strong in many areas. Between the 2017 and 2021 calendar years, earnings per share (EPS) increased from ¢76.1 to ¢142.5. By my calculations, this company has a compound annual EPS growth rate of 13.4%. This is both strong and consistent. Furthermore, revenue has steadily increased over the same period from $4.7bn to $7.4bn. It is worth noting, however, that a resurgence of the Covid-19 pandemic might halt mining operations.

There is also an indication that Antofagasta is undervalued. By using the price-to-earnings (P/E) ratio metric, I see that the company has a forward P/E ratio of 15.58. This is slightly lower than Glencore‘s 16.07, which is a major competitor in the sector. Currently the Antofagasta share price is trading at 1,637p, down 15% in the past year.

A cheap oil stock    

The second business is Tullow Oil (LSE: TLW), an oil exploration and production firm operating across Africa and South America. In a recent trading update for the three months to 31 December 2021, the company reported that underlying operating cash flow was expected to be $700m, ahead of guidance. What’s more, year-end net debt fell to $2.1bn from $2.4bn in 2020.

Going forward, it plans to drill three new wells in its Jubilee field in Ghana and expects the yield to be about three times greater than that of 2021. Furthermore, the firm will commence spudding (the beginning of the drilling process) at the Kanuku JV field in Guyana Q2 2022. While this brings the possibility of further oil discoveries, there is always the risk that the yield will be disappointing.

Tullow Oil has a trailing P/E ratio of just 5.17. This is significantly lower than BP, a leader in the oil market. BP’s trailing P/E ratio is 13.73. This suggests to me that there is massive upside potential for the Tullow Oil share price, that is currently 57.88p, up 23.5% in the past year.  

Both of these companies may be cheap and are supported by strong financial results. By adding them to my portfolio, I think I can achieve long-term growth. I will be buying shares in both firms without delay.

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.

Andrew Woods 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

British bank notes and coins
Investing Articles

Should I buy M&G shares for the 9.8% dividend yield?

With the M&G dividend yield close to double digits, this existing shareholder explains why he'd happily buy more of the…

Read more »

British Isles on nautical map
Investing Articles

This cheap UK stock could rise 30%, the City says

Analysts covering Serco Group shares reckon they could rise by over a quarter. But is this UK stock a good…

Read more »

2024 year number handwritten on a sandy beach at sunrise
Investing Articles

Here’s how I’d aim for a million by investing £45 a day

Christopher Ruane thinks putting £45 a day into blue-chip shares could help him aim for a million. Here are some…

Read more »

Light trails from traffic moving down The Mound in central Edinburgh, Scotland during December
Investing Articles

I’d buy FTSE 100 shares in December before the next stock market rally!

Christopher Ruane explains why he would happily snap up cheap FTSE 100 shares between now and the end of the…

Read more »

Businesswoman calculating finances in an office
Investing Articles

6% yield and 8% annual revenue growth! A passive income opportunity

Why not have the best of both worlds? Our writer explores a passive income opportunity with a 6% yield, bolstered…

Read more »

Group of young friends toasting each other with beers in a pub
Investing Articles

I’ve been loading up on this FTSE 250 share in November!

Christopher Ruane explains why he's been adding even more shares in this well-known FTSE 250 name to his portfolio this…

Read more »

One English pound placed on a graph to represent an economic down turn
Investing Articles

Down 30%, these cheap shares are on sale!

Cheap shares don’t mean anything to our analyst unless there’s real value in what he’s buying. Let’s see his Foolish…

Read more »

Photo of a man going through financial problems
Investing Articles

I can’t believe how far these FTSE 100 shares have fallen!

While the FTSE 100 is up 0.7% over six months, these five Footsie flops have collapsed 26% to 40%. But…

Read more »