With most equity indexes firmly in the red in 2022, there are opportunities galore to snap up cheap shares. There are two businesses in particular that I have my eye on. Indeed, the short-term outlook for global equities remains gloomy. However, with a longer-term outlook of 10 years or more, I’d expect both of these companies to reward me as a patient investor.
Legal & General
The first share that I’m considering is Legal & General (LSE: LGEN). There is an elephant in the room though. Recently, the pensions market has been in turmoil. Some pension providers have been forced to sell bonds and shares to meet demands for cash. Legal & General has reassured investors that it is not one of these forced sellers. That being said, this turbulent period highlights that there are risks in this business.
The long-term picture for Legal & General gives me more confidence. The demand for insurance and pensions tends to be robust. While the company may not quite have an economic moat, it is a well established brand with a large customer base.
The share price has tumbled 20% in the last 12 months. It now trades at a price-to-earnings (P/E) ratio of just 6.6. That looks cheap to me given that its median P/E in the past decade has been over 10. This is also an attractive investment from an income perspective. It yields over 8% and the company has set out plans to increase dividends annually until 2024. While dividends are never guaranteed, this one is well covered. Even in times of economic turmoil, this healthy dividend could provide a cushion for my portfolio.
Meta
The second share I like is Meta (NASDAQ: META). I don’t own Meta shares in my portfolio today but I’d be happy buying at today’s prices. Down 60% in the last 12 months, I believe Meta has been oversold. Any investment decision I will make has little to do with its huge investments in the metaverse. Whether these pay off or not is purely speculation at this stage. Digital advertising remains the core business for Meta.
Yes, it has lost market share, and user growth across its products has started to slow. There are also headwinds in the form of iOS privacy changes and a slowing economy. However, it remains attractive to global advertisers. As the macroeconomic picture brightens, I’d expect investor sentiment to improve. Third-quarter results will be released at the end of the month. I’m particular keen to see whether the growth in Reels, its short-form video offering, continues.
With a forward P/E of 10.7, it could be a compelling buy for my portfolio. Its advertising business generated $115bn in revenue with an operating profit margin of 49%. The slowing growth may already be priced into the stock at these levels and I think the stock looks like a bargain today.
