These cheap shares both trade on price-to-earnings (P/E) ratios well below the value benchmark of 10 times. Here’s why I’d buy them today and look to hold them for years.
Pan African Resources
Buying gold stocks could be a good idea as prices of the yellow metal soars. Pan African Resources (LSE:PAF) is one mining stock on my radar due to its incredible value.
The AIM share trades on a forward P/E ratio of just five times. Meanwhile its corresponding dividend yield sits at a juicy 5.5%.
The price of bullion has in recent hours rocketed back through the $2,000 per ounce level. With this key technical level breached — and worries continuing to mount over US and European banks — a surge to new record highs could be imminent.
Having exposure to gold can be a good idea for investors at any time, in fact. It can protect an individual’s wealth when crises unexpectedly break and prices of riskier assets like UK shares tumble.
Owing gold-producing stocks can be turbulent business sometimes. Production troubles can be commonplace and earnings can regularly take a big hit. Indeed, power supply problems have hit Pan African Resources’ own output in recent months.
Yet I believe the possible benefits of buying this South African miner outweigh this risk. It has a number of exciting growth projects in its portfolio. And last week it sealed funding for the construction of the Mintails gold asset, a project the business said will “significantly” contribute to group production over the next two decades.
UK shares that specialise in IT services lack the scale and the consumer recognition of their US counterparts. Kape Technologies (LSE:KAPE), for example, is a small fish compared to digital security rivals including NortonLifeLock, IBM, and Microsoft.
Yet the rate at which the cyber protection sector is growing still makes British companies worth serious attention in my book. Analysts at McKinsey & Company think the global market could eventually be worth between a staggering $1.5trn to $2trn, up significantly from $150bn today.
Recent impressive trading at Kape illustrates the massive opportunity here. The number of paying customers on its books soared 12% in 2022 to 7.4m. This helped revenues soar to a better-than-expected $623m from $230.7m a year earlier.
Recent successes explain why the IT experts have been the subject of a takeover bid by Unikmind, a company owned by majority shareholder Teddy Sagi. The offer of 285p per share was rejected but a fresh approach could be just a matter of time.
City analysts expect Kape’s strong record of annual earnings growth to keep rolling on in 2023. This leaves the business trading on a rock-bottom forward P/E ratio of just 5.5 times.
At these levels I think the AIM company could be too cheap to miss. In fact if I have spare cash to invest I’ll look to add it to my own UK shares portfolio.