Both the FTSE 100 and FTSE 250 have had cracking starts to the year. Nonetheless, a number of UK shares still look like absolute steals.
As a result, I want to snap up some bargains. I’m hoping to have some spare cash this month. I plan to put it to work in the stock market.
A solid start
Year to date the Footsie has risen an impressive 8.6%. Similarly, the FTSE 250 has climbed 5.2%.
That’s good to see. Investing has been hard work in recent years. Retail investors have endured a pandemic, double-figure inflation figures, and interest rates not seen for 40 years. But things finally seem to be on the up.
Retail figures for the opening months of the year have shown that we’re heading in the right direction. While I’m sure we’ll experience more volatility in 2024 as economic uncertainty continues, with UK shares looking so cheap, I reckon they’re well-placed to soar in the years to come.
What I’m buying
That’s all well and good saying that. But what do I plan to buy?
Well, BP (LSE: BP.) is one stock. At its current price of 502p, I think it looks cheap. It has impressed so far this year, rising 6.6%. Even so, I think its share price still has growing room.
Today, I can buy its shares trading on a price-to-earnings (P/E) ratio of just 7.6. That’s below the Footsie average of 11. It’s also below competitors such as Shell, which trades on a P/E of 13.4. To me, that shows the stock is good value for money.
The biggest risk of investing in BP is the threat of the energy transition. The world is moving to a greener future. As such, companies such as BP that are focused on fossil fuels have come under massive scrutiny in recent years. Going forward, I’d expect this pressure to mount.
However, it seems like the original 2050 target for net zero will now be pushed back. 2023’s UN Climate Change Conference final statement highlighted that while 2050 remained the aim, there was a caveat: achieving this goal must be done “in keeping with the science”.
Therefore, it looks incredibly likely that fossil fuels will be sticking around for longer than expected.
A key driving force
What’s more, as contradictory as it may sound, with the large amount of resources it has, BP will actually be key in creating a greener future as it continues to invest in renewable energy. For example, it has increased its investment into low-carbon energy in recent years.
Coupled with its cheap price, I also like its dividend yield. The stock yields 4.6%, above the Footsie average (3.9%). On top of that, the firm plans to buy back up to $14bn of shares by 2025, including $3.5bn in the first half of this year. In its Q1 update, it announced it remains on track to achieve this.
Great value
With that, if I have the spare cash this month, I plan to increase my position in BP. In my opinion, it’s a prime example of a severely undervalued UK stock that has the potential to keep rising in the years ahead.
