3 cheap UK shares I’d buy in December

Our writer explains why he would add this trio of cheap UK shares to his portfolio in coming weeks if he had spare funds to invest.

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I have been looking for attractively priced shares in great companies I can add to my portfolio all year long – and December is no exception! Here are three cheap UK shares I plan to add to my portfolio next month if I have spare cash to invest.

Assura

Healthcare-focussed landlord Assura (LSE: AGR) announced its interim results last week. The title “Delivering continued growth” was at best a selective interpretation. Pre-tax profits more than halved compared to the same period last year.

However, there was some growth. Rental income increased and the quarterly dividend was raised 5%.

As an investor, my heckles are raised by how the company headlined its results. Despite my concerns about the communication style, though, I would still invest in the company next month if I had spare cash. The company’s focus on tenants like ambulance centres and doctors’ surgeries should mean substantial rent defaults are unlikely even if the economy gets weaker. The dividend yield of 5.6% attracts me and the shares are 20% cheaper now than they were a year ago.

One risk I see is the company’s net debt, which now stands close to £1.1bn. Rising interest rates combined with growing debt levels could eat into profits in coming years.

Dunelm

The homewares retailer Dunelm (LSE: DNLM) trades on a price-to-earnings ratio of 12. I see that as good value for what I regard as a world-class retail operator.

The company has demonstrated that its business model is consistently profitable and cash generative. Although I see a risk that tightening household budgets could hurt sales, the opposite may turn out to be true. Dunelm’s price competitiveness could actually help it attract more customers from rivals.

Over the past year, the Dunelm share price has retreated by 25%.

That just makes these cheap UK shares even more attractive to me as an existing shareholder than before. I see a buying opportunity for my portfolio in a company I think has established a distinctive market position and can translate that into profits.

Scottish Mortgage Investment Trust

Dunelm has lost a quarter of its value over the past year, but Scottish Mortgage Investment Trust (LSE: SMT) has fared almost twice as badly in that period.

That 48% fall over the past 12 months reflects the declining worth of many of the trust’s investments. Its heavy exposure to tech has seen it suffer as the sector’s valuations have fallen. There is a risk that they could move down further, hurting the Scottish Mortgage share price in their wake.

However, as a long-term investor, I think the fall in Scottish Mortgage shares offers a buying opportunity for my portfolio. The trust has a track record of spotting compelling growth stories at an early stage. Over time I believe that can still be a lucrative investment strategy.

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.

C Ruane has positions in Dunelm Group Plc. 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.

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