Why do I think this is a great time for buying up some super cheap value shares? It’s because I feel a new bull market could be on its way.
In fact, I’m so convinced that I’d say it’s a matter of when, not if. And the best time to find stock market value is surely when the storm clouds are at their darkest.
What do I mean by value shares? To put it simply, I’m talking about shares that I see as priced well below their fundamental value.
Never had it so good
And I see so many of them today, it’s hard to remember a time when I’ve been more bullish about buying shares for the long term.
Why now? Everyone seems to be just so pessimistic and running scared from the stock market. Now, I don’t want to make light of that, as we really are feeling the pinch in the UK.
There’s high inflation, interest rates, war, tensions between the West and China, an over-heating planet…
Storm before the calm
But I think what we’re looking at now might just be the storm before the calm. And we did just get a few bits of bright news amid the gloom.
The IMF now says it expects the UK economy to avoid recession. UK borrowing last year came in lower than expected too. Oh, and food price inflation has just fallen for the second month.
If these trends continue, people might just start to get a bit optimistic again. And if that happens, folk could start thinking that, just maybe, all the UK’s top companies might not be set to go bust.
And their shares might even be worth buying.
Time for contrarians
And wouldn’t it be horrible if that happens? I mean, they’ll all be buying those cheap value shares and pushing the prices up. And I don’t that. No, I want the shares to stay cheap so I can keep buying.
Ace investor Sir John Templeton was one of the most successful contrarian investors of the 20th century.
In 1995 in Forbes, he wrote:
People are always asking me where is the outlook good, but that’s the wrong question. The right question is: Where is the outlook the most miserable?
He pointed out that we should be trying to buy shares at the lowest possible price compared to what a company is actually worth. And that’s a good definition of value shares.
We should, wrote Sir John, buy when people are most frightened and pessimistic.
Best buys
The banks look great value to me, with Barclays on a price-to-earnings ration of under five. And Taylor Wimpey is on dividend yields of 7.5% for the next few years.
These are just two in my favourite FTSE 100 sectors right now, and there are many more out there.
They do face risks. And I think the biggest is that they might become even better value. But that’s just the optimistic way of saying they could fall further first.
So yes, keep buying value shares while they’re cheap this year — that’s my plan.
