At the top of my wish list this Christmas is one entry — ‘cheap shares’. And right now, I see plenty out there.
There are many ways to build long-term wealth. But my plan is to buy undervalued shares and hold them for the years ahead. The long-term capital growth I hope to accumulate along the way I’ll then use to fund my lifestyle further down the line.
The market has been through many ups and downs in the last three years. The pandemic, rising energy prices, wars, and a cost-of-living crisis have deterred some investors from buying shares. But with that, I see many opportunities.
2023 might be nearing an end, but I’m not slowing down. I’m hoping to have some spare cash this month. Here’s what I plan to do with it.
Is cash really king?
Now, with some savings accounts offering interest rates of 5%+, it may be tempting to put my cash into savings. However, I see this as a short-term solution.
Of course, having some money stashed away for a rainy day makes sense. But research shows that in the long run shares consistently outperform cash.
I have a 30-year time frame. Therefore, by leaving my cash in the bank, I’d be missing out on the growth opportunities the market provides. For example, since its inception, the FTSE 100 has an average annualised return of around 6%-7%.
What to buy
So, putting my plan into action, what should I buy?
Well, right now I’m turning my attention to UK shares. Of these, I’m eyeing Safestore (LSE: SAFE), a stock I already hold.
The self-storage unit provider has struggled in the past 12 months. During this time, over 13% has been shaved off its share price. Yet with a price-to-earnings ratio of just 6.2, it looks cheap to me.
There’s a chance that the stock will continue to struggle in the upcoming months. High interest rates mean buying facilities will be more expensive and the firm also has some debt that’ll be more costly to service. Furthermore, there’s the threat of rising competition.
However, with plans for international expansion, I think the long-term outlook for Safestore is a positive one. With it being the clear market leader in the UK, it’s now turned to Europe for growth opportunities. Since last year, the business has added development sites in Paris, the Netherlands, and Germany, to name a few.
To add to all of that, it has a dividend yield of 3.7%, which sits around the Footsie average. While I’m aware that dividends are never guaranteed, its total dividend payout increased from £31.9m in H1 2022 to £37.7m in H1 2023, showing the firm is keen to return to shareholders. In the last decade, its dividend has risen by nearly 20% annually.
The move
I could wait until the New Year or try and play the market in the hope that prices continue to fall. But I’m taking action in December. And it’s shares such as Safestore I’ll be targeting.
