3 cheap stocks to buy with £1k in this market recovery

The market rebound has left some good, cheap stocks behind, says Roland Head. He reveals three companies on his buy list.

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When the market dipped in February, I could see plenty of cheap stocks to buy. Since then, the FTSE 100 has bounced back to pre-invasion levels. The good news is that I reckon there are still some bargains out there.

I’ve been hunting through the wider market and have found three FTSE 250 dividend stocks that look too cheap to me. They’re all stocks I’d be happy to add to my portfolio today with a spare £1,000.

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A bargain 6% yield?

Television group ITV (LSE: ITV) is seriously unloved at the moment. This former FTSE 100 company saw its share price slump 25% at the start of March, after CEO Carolyn McCall revealed plans to supercharge streaming.

This strategy seems logical to me. ITV has a 33% share of UK commercial television viewing. To protect this market share, the company needs to expand its share of UK on-demand viewing.

The extra spending required will hit ITV’s profits for a couple of years. That’s a risk. However, my sums suggest the dividend should be safe throughout this period, giving a forecast yield of 6.2% at current levels.

ITV’s share price slump has left the stock trading on just six times earnings, despite its strong financial position. I reckon this is too cheap. I continue to hold and would be happy to buy more.

Cheap industrial stocks

Another FTSE 250 stock that’s come onto my radar recently is precision measurement specialist Spectris (LSE: SXS).

This £2.8bn group has a range of businesses that produce measurement instruments, test equipment and simulation software for industry. It operates in a range of attractive sectors, including pharmaceuticals and electronics.

The Spectris share price has fallen by nearly 20% since the company revealed plans to buy fellow high-tech specialist Oxford Instruments for £1.8bn. However, the company has now withdrawn from this deal, blaming market disruption caused by the Ukraine conflict.

I think Spectris’ growth might slow if western countries suffer a recession. But the company has cleared its debts and the shares look affordable to me.

Spectris’ forecast price to earnings ratio of 15 may not seem obviously cheap, but this company has high profits margins and specialist products. I think it deserves a small premium. I’d be happy to buy at this level.

Unfairly cheap?

My final pick is emerging markets asset management specialist Ashmore Group (LSE: ASHM). This £1.7bn FTSE 250 company is run by founder Mark Coombs, who still owns more than 30% of the stock.

I think this should mean Coombs’ interests are aligned with those of other shareholders.

However, one problem with this business is that its profitability is linked to market cycles. After a strong run of growth from 2018 to 2021, analysts expect Ashmore’s profits to fall this year as market conditions weaken. One concern is the company’s exposure to China’s troubled property market.

There are always risks when investing in shares. But Ashmore has a diversified portfolio, experienced management and is highly profitable.

The shares now trade on just 11 times earnings, with a covered 7% dividend yield. This is one cheap stock I’d buy today.

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Roland Head owns ITV. The Motley Fool UK has recommended ITV and Spectris. 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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