Many stocks have fallen due to recent market volatility. With that in mind, two cheap shares that I believe are opportunities not to be missed ahead of any potential bull run are JD Sports (LSE: JD.) and Lloyds Banking Group (LSE: LLOY).
JD’s rise in the retail world has been remarkable, in my opinion. From humble beginnings with one store in Bury, England, back in 1983, it has grown to a worldwide retail sportswear business and continues to aggressively expand into new markets. It has also diversified its business with its own clothing lines and a gym business, JD Gyms.
JD shares are currently trading for 139p, which is a 10% increase over a 12-month period, as they were trading for 126p at this point last year. Two years ago, the shares were trading 40% higher than current levels.
JD Sports is one of a number of quality cheap shares out there. On a price-to-earnings ratio of just 10, the shares are priced below the FTSE 100 index average of 14.
In addition to this, JD shares would boost my passive income with a dividend yield of less than 1%. Although this is not the highest, if growth plans come to fruition, earnings and returns could grow too.
Softened consumer spending due to the current economic turmoil and a cost-of-living crisis could dampen JD’s performance and returns, at least in the short term.
Overall, my bullish stance on JD shares stems from its ability to navigate tough economic times in the past. If it applies the same principles to its current growth aspirations of worldwide expansion, which includes forays into the lucrative US and Middle Eastern markets, the shares could soar to new heights.
Lloyds Banking Group
I like Lloyds shares as one of the biggest banks in the UK. It is also one of the largest mortgage lenders in the UK.
Lloyds shares are currently trading for 41p. At this time last year, they were trading for 45p, which is an 8% drop over a 12-month period. Since February, the shares have fallen by 22% from 53p to current levels.
Lloyds is one of a number of cheap shares in the banking sector I’m considering. At present, the shares trade on a price-to-earnings ratio of just five, well below the FTSE 100 average. In addition to this, my passive income would be boosted with a dividend yield of 6%. I do understand that dividends are never guaranteed.
Lloyds and other major banks are under siege from challenger banks that are working to prize away their dominant market positions. Furthermore, Lloyds could experience issues in collecting mortgage payments due to the cost-of-living crisis. To add to this, higher interest rates could impact new mortgage business levels too as they become harder to obtain.
On a short-term basis, Lloyds could boost performance through increased net interest margins. Conversely, these same higher interest rates could cause defaults on existing loans too, negatively impacting performance. There is an element of risk and reward right now, in my opinion.
Cheap shares not to be missed
To conclude, despite both stocks having tangible risks that could impact performance and returns, JD and Lloyds could be shrewd buys now ahead of any potential bull run. I already own JD shares and will be adding Lloyds shares to my holdings imminently.