£10K in an ISA? I’d snap up these 5 cheap shares!

Our writer explains how, if he had a spare £10K in his ISA, he would spend it on a handful of cheap shares in well-known British companies.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Elevated view over city of London skyline

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

If I had spare money sitting in an ISA today, I might be tempted to wait and see what happens next in the stock market before investing it. On the other hand, with even the flagship FTSE 100 index currently throwing up a lot of cheap shares, I would probably just take what I think is the great value already on offer.

Here are five such cheap shares I would buy today for my ISA.

To help manage my risk (after all, cheap shares are sometimes cheap for a reason!) I would diversify my ISA by spreading the £10K evenly across all five.

Iconic name? Check. Large customer base? Check. Huge target market with long-term demand? Check.

So far, so good when it comes to the investment case for Legal & General.

But this is not simply a business that looks good on paper. It is already a proven performer, with post-tax profits last year coming in at £2.3bn.

Despite that, the shares trade on a price-to-earnings (P/E) ratio of six while offering a dividend yield of 8.6%.

Rocky markets could lead investors to withdraw funds, hurting profits. But in the long term, I am confident about the prospects for the company.


Insurer Phoenix announced its interim results this week. It held the interim dividend flat and the shares currently yield 9.8%.

With a £2.2bn loss last year, are these really cheap shares?

Accounting rules for financial services institutions like Phoenix are not always flattering. Considering cash generation, the business does look cheap to me. It expects to generate around £1.4bn of cash this year, which is equivalent to over a quarter of its market capitalisation.

Volatile markets pose a risk to earnings. I like the cash generation potential, though.


Another business that reported its interim results this week – and boosted the half-year dividend – is M&G.

With a strong brand, large customer base, and ongoing demand for its asset management products, I think the business is in good shape.

The yield is 9.8%. An adjusted operating profit of £380m in the six months under review makes the company look cheap to me, with a market capitalisation beneath £5bn.

One risk I see is reduced consumer spending in many markets leading to a net outflow of funds and lower commissions. For now, though, the company continues to see a net inflow aside from in its Heritage division.

JD Sports

Retailer JD Sports also published its interim results this week. Revenues grew 8.3% compared to the prior year period.

I like the unique market positioning and global footprint. An ambitious shop expansion programme could push up costs. While basic earnings per share soared 30% year on year, profit before tax and adjusted items actually fell slightly.

The interim dividend more than doubled. The share price looks cheap to me for what the results described as “a very cash generative business“.

British American Tobacco

With a P/E ratio of seven, British American Tobacco also strikes me as a cheap share.

Declining cigarette sales are a risk to revenues and profits. But the company is expanding its non-cigarette lines and still make huge profits from cigarettes.

I like its high yield of 8.4% to boot.

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 British American Tobacco P.l.c., JD Sports Fashion, Legal & General Group Plc, and M&g Plc. The Motley Fool UK has recommended British American Tobacco P.l.c. and M&g Plc. 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.

More on Investing Articles

Mixed-race female couple enjoying themselves on a walk
Investing Articles

Are Raspberry Pi shares a once-in-a-lifetime chance to get rich?

With Raspberry Pi shares surging after a successful IPO, could this UK tech startup offer a long-term wealth creation opportunity…

Read more »

Newspaper and direction sign with investment options
Investing Articles

Huge gains and 9% yields: why now’s an amazing time to be a stock market investor

The stock market’s generating fantastic returns in 2024. Whether you're looking for gains or income, it’s a great time to…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

This steady dividend payer looks like one of the best bargain stocks in the FTSE 100

A yield of 4.7% and a consistent dividend record make this FTSE 100 company look like good value in an…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

£9,000 in savings? That could become passive income of £19,175 a year

It's possible to invest affordable sums of money into building a big passive income stream. Here's how I'd go about…

Read more »

Black father and two young daughters dancing at home
Investing Articles

Legal & General shares: a once-in-a-decade passive income opportunity?

Is a dividend yield at its highest level in a decade, combined with a strong record of increasing payouts, a…

Read more »

Investing Articles

With a 7% yield and 4.1 P/E, is this the best passive income stock on the FTSE 350?

Millions of Britons invest for a passive income. While our writer isn't buying this stock yet, he believes it's worth…

Read more »

Middle-aged Caucasian woman deep in thought while looking out of the window
Investing Articles

This amazing FTSE 250 has a 8.8% dividend yield and trades at just 4x forward earnings!

Our Foolish writer believes this FTSE 250 stock is worth keeping a very close eye on. However, he's not keen…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Could this brilliant airline stock be the most undervalued company on the FTSE 100?

Our writer believes this FTSE 100 stock may provide market-beating returns over the coming years, noting its undervalued metrics and…

Read more »