These cheap UK shares look way too good to ignore right now

With the UK stock market reaching new highs recently, this Fool plans to grab these two remaining cheap shares before they rise.

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The FTSE 100 hit another new record high this month and I’m wondering if there’ll be any cheap shares left soon. Until recently, the market has had a rough couple of years with the prices of most shares falling. 

Now it finally looks like things are on the up.

I want to take advantage of this by stocking up on two shares I feel are undervalued. One I already own and the other is on my list for my next buying round.

A young dividend powerhouse

Serica Energy (LSE: SQZ) is an energy company that prospects for oil and gas opportunities in the UK. Its share price hasn’t exactly been mind-blowing lately – in fact, it’s down a rather painful 22% in the past year. 

But in 2022 it did quite well and now its good fortune may be returning. 

The company has just been granted approval to develop the Belinda subsea oil field in the North Sea. It also took on a new CEO this month and has attracted the attention of major broker Jefferies, which put in a Buy rating for the stock on 16 May.

The real value, however, is the exceptionally high 13% dividend yield

The next ex-dividend date is 26 June, with a payment of 14p per share set for 24 July. That certainly makes the £1.77 shares more attractive. Payments have been sporadic though and aren’t well covered by cash flows so there’s no guarantee they will continue. 

Still, I think the company has potential. Based on future cash flow estimates it could be undervalued by as much as 36%. There is good consensus analysts among that the price could rise by 64% in the coming 12 months (but as we know, that doesn’t mean it will rise).

A plunging UK stalwart

Reckitt Benckiser (LSE: RKT) is currently the worst-performing stock in my portfolio. It’s down 20% this year alone and is single-handedly destroying what would otherwise be an impressive profit and loss (P&L) score for me.

So why do I want to buy more of its shares?

Reckitt stock crashed in March when one of its products, Enfamil, was blamed for the tragic death of a premature baby in the US. It’s already paid $60m in damages and that could increase if more cases are brought forward. It’s not a good situation for any company to be in. 

But (hopefully) it’s a one-off occurrence and I believe the majority of the damage is now priced in. It’s a well-established firm with a wide range of popular products, and I think it could be only a matter of time before it bounces back. 

At £44, the shares might not seem cheap but they’re the lowest they’ve been in over 10 years. If somebody had told me in 2020 that I’d be able to buy Reckitt shares for £44 in a few years, I wouldn’t have believed them. 

Still, the price could fall further if more fines are imposed. But already there are signs of improvement, with the price up 7% since the April low. Unfortunately for me, it could be a while before I see profit. But for investors considering a buy now, I think this could be a bargain.

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.

Mark Hartley has positions in Reckitt Benckiser Group Plc. The Motley Fool UK has recommended Reckitt Benckiser Group 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.

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