January is when many of us set goals for the coming year. For investors, it’s also a period where many try and research cheap shares that could set up their portfolio for a profitable year. I don’t have the funds to buy every share that catches my eye, but here are three I think deserve some attention.
These boots are made for walking…
Calling a stock cheap is quite subjective. Therefore, I try and base my decisions on at least one objective factor. This could include share price movement, price-to-earnings ratio, or some other financial metric.
To begin with, I’ve noted Dr Martens (LSE:DOCS). The share price recently hit all-time lows at 79p. It’s down 52% over the past year.
The fashion footwear brand was hit by logistical problems earlier last year which hurt the stock. It took another dive lower in December following reports that full-year profits would be worse than expected due to warmer autumn/winter weather and slower US sales.
At the current price, the stock does look very cheap. Yet I shouldn’t forget that the firm still expects to report a pre-tax profit of over £100m for the year. I understand the business is in a rough patch, but the brand has a strong following. With actions being taken to boost marketing, I’d expect sales to recover over the next year.
A growing market
Another idea I like is NIO (NYSE:NIO). The Asian electric vehicle (EV) manufacturer has long been in the shadow of Tesla. It’s down a modest 6% over the past year, but this looks cheap to me from a different angle.
The EV market is expected to continue to grow in coming years. In fact, one data set I saw has it growing at an annual compound rate of 17.8% through to 2030. NIO has a huge advantage in being the main option for China and the rest of Asia for EV’s. Therefore, I think the business should be able to grow revenues and profits simply as a benefactor of the rising tide of consumer demand.
I don’t believe this growth is factored in to the current share price. That’s why I think it looks cheap. As a risk, competition in this area is certainly hotting up. Traditional car brands are of course getting involved in the EV revolution, which could eat into NIO’s market share.
A turn in the property space
The Impact Healthcare REIT (LSE:IHR) is the final stock on my watchlist. I believe it’s cheap because the share price trades at a 21% discount to the net asset value (NAV). The share price has fallen by 13% over the past year.
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To understand this, it’s key to note that the real estate investment trust (REIT) has a net asset value made up of the properties owned. Yet this value can differ from the share price, which trades on short-term supply and demand.
Over the long term, the share price should correct and trade closer to the NAV. Therefore, I see this as an opportunity.
The risk is that poor sentiment around commercial property continues. This could keep the share price depressed for longer. Yet, ultimately, I believe the property sector is due a strong year, especially if interest rates fall.
