I have been thinking about what shares I can tuck away in my new Stocks and Shares ISA and hold for the coming decade. That suits my style as a long-term investor. So I have been hunting for cheap shares to buy.
Here are two I am planning to snap up for my ISA in coming weeks if I have spare cash to invest.
ITV
I already own some shares in ITV (LSE: ITV). But its ongoing lacklustre share price performance means I still regard the company as cheaply priced, relative to its commercial prospects.
Over the past year, the shares have inched up 5%. The five-year record has been dismal, with the company’s valuation falling 46%.
But are things as bad as the long-term share price chart seems to suggest?
Yes, terrestrial television is in long-term structural decline. That could lead to smaller revenues and profits. For now, though, it remains a sizeable contributor to ITV’s turnover.
Meanwhile, the company has been investing in matching its digital offering to what it thinks viewers want. That may take some years to reap rewards on a grand scale, but I see it as evidence that the business is moving with the times. Its long experience and familiar brand give it a strong chance in the digital stakes, I reckon.
Meanwhile, what I think some investors overlook is that ITV operates a very successful studio and production business that has seen growing demand in recent years.
Last year, ITV made post-tax profits of £435m. Yet a market capitalisation of only £3.3bn means that it trades on a price-to-earnings (P/E) ratio of just six. That looks cheap to me. The shares offer a dividend yield of 6.2%.
Altria
Also on my shopping list of cheap shares to buy for my portfolio is US tobacco giant Altria (NYSE: MO).
Its P/E ratio is 14, which I think offers good value relative to the long-term potential of the business. Altria owns very strong brands, especially Marlboro. I think that can help it deal with an ongoing decline in cigarette volumes.
I do see changing habits as a risk to revenues and profits. But I reckon the company’s cash cow from cigarettes has some decades left to run. Altria’s iconic brands could also help it do well in the non-cigarette tobacco space. So far it has made expensive missteps there, but over the long term I expect it to land on a viable strategy. Altria also owns a 10% stake in brewing giant Anheuser-Busch.
I am not excited about the growth prospects from Altria. But income is a different story. The yield is a juicy 8.2%. Altria is a Dividend Aristocrat that has increased its payout annually for more than half a century.
That is not necessarily a guide to what will happen in future. But, with the shares now 18% cheaper than they were five years ago, I am ready to add some more to my portfolio.
