£1,000 to invest? Here are 2 cheap shares I’d snap up right now!

These two cheap shares seem to be getting left behind, despite delivering solid results. Here’s why a buying opportunity may have just emerged.

| More on:

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.

Couple working from home while daughter watches video on smartphone with headphones on

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.

With the stock market sliding throughout October, there are still plenty of cheap shares for investors to capitalise on. And looking at my portfolio, multiple top-notch companies have been caught in the crossfire. As such, now might be an excellent time to load up on more discounted shares with a spare grand at hand. Let’s take a closer look.

Investing in construction

Much like the real estate sector, infrastructure projects are notoriously cyclical. And with interest rates making debt more expensive, many projects have been delayed, or put on hold, until the lending environment stabilises. That’s created several challenges for Somero Enterprises (LSE:SOM).

The company is a leader in laser-guided concrete laying screed machines. It’s hardly the most glamorous company, but its machines have become an integral part of the US construction industry, enabling customers to save considerably in terms of time and money.

The current downcycle within the market is clearly reflected in its most recent results, with sales and earnings down by double digits. Yet lumpy earnings are hardly anything new for Somero. And with a cash-rich, debt-free balance sheet, the firm has plenty of resources at hand to weather the storm, as well as maintain dividends.

A prolonged slowdown in its core markets could, of course, eventually turn problematic. And that’s a risk investors ought to take into account.

However, with the completion of a 50,000 sq ft expansion to its Michigan facility, Somero’s operational capacity has improved by an estimated 35%. In my opinion, that places the firm in a perfect position to thrive once demand eventually returns. And at a price-to-earnings (P/E) ratio of just 6.9, these shares look dirt cheap for when I have some cash to spare.

Efficiency is the new sexy

The macroeconomic environment being rather unpleasant for unprofitable and debt-ridden enterprises. So, improving margins has become a top priority for many firms. That’s why so many headlines have covered the latest round of layoffs in recent months. This is especially prevalent in the tech sector.

However, while sacking employees can alleviate short-term struggles, it can end up destroying value in the long run. Numerous studies have shown that rehiring and retraining new employees once economic conditions improve on average is far more costly than just retaining original staff through the storm.

That’s why optimising processes to eliminate bottlenecks and improve operational efficiency is typically a far better solution. And it’s one that Kainos Group (LSE:KNOS) provides.

The company works with other businesses to digitalise operations, helps integrate the Workday human capital management (HCM) platform, and offers its own suite of software solutions that integrate into Workday. And its solutions are already being used by leading institutions, including Shopify, Netflix, and even the NHS.

With demand for cost-saving services going through the roof, Kaino is having little trouble attracting increased spending. Sales and profits are up by double digits. However, the revenue stream is largely dependent on the adoption and utilisation of the Workday platform. And that does pose a significant risk if other HCM solutions steal market share.

At a P/E ratio of 36, these shares don’t look particularly cheap. Yet, on a forward-earnings basis, this metric drops to 23. That’s still a bit pricy, but compared to its five-year average of 35, a discount seems to have emerged. That’s why I’ve recently added this business to my portfolio.

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.

Zaven Boyrazian has positions in Kainos Group Plc, Shopify, and Somero Enterprises. The Motley Fool UK has recommended Kainos Group Plc, Shopify, and Somero Enterprises. 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

Person holding magnifying glass over important document, reading the small print
Investing Articles

I’d seriously consider buying this UK technology small-cap stock today

Today's positive trading figures and a runway of growth potential ahead make this small-cap stock look attractive to me now.

Read more »

Investing Articles

It’s October! Does this mean UK stocks are going to crash?

Whisper it quietly, but four of the five biggest one-day falls in the FTSE 100 have been in the month…

Read more »

Investing Articles

With new nuclear energy deals in view, Rolls-Royce’s share price looks cheap to me anywhere under £11.48

Rolls-Royce’s share price dipped after a problem on a Cathay Pacific flight but has now bounced back on positive news…

Read more »

Investing Articles

Is the Greggs share price now a screaming buy for me after falling 10% this month?

Harvey Jones watched the Greggs share price climb and climb, but decided it was too expensive for him. Should he…

Read more »

Young black colleagues high-fiving each other at work
US Stock

3 super S&P 500 stocks that could smash global ETFs over the next 5 years

History shows that allocating some capital to top S&P 500 stocks can significantly boost an investor's financial returns over the…

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

This FTSE 250 insider’s selling but 2 brokers say “buy”. What’s going on?

A director of this FTSE 250 retailer has sold £114m of stock but brokers rate its shares a Buy. Our…

Read more »

Investing Articles

With a P/E of 7.7 is the Lloyds share price back in deep bargain territory?

Harvey Jones has enjoyed watching the Lloyds share price rise and rise over the last year, while its dividends are…

Read more »

Investing Articles

BP, Phoenix Group and Rolls-Royce are 3 shares Hargreaves Lansdown investors have been buying

BP shares have been attracting attention recently. But the oil giant's not the only stock UK investors have been snapping…

Read more »