Here are 2 of my favourite cheap shares to buy today

Harvey Jones is on the hunt for cheap shares and was surprised to discover these two big-name FTSE 100 stocks trading at reduced valuations today.

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After a bumpy few months for the FTSE 100 I can see lots of cheap shares I’d like to buy right now. That’s great news because cheap shares are very much my favourite type.

Top of the list is Barclays (LSE: BARC). I’m astonished to see the bank trading with a price-to-earnings (P/E) ratio of just 9.2. That’s well below the FTSE 100 average of 14.2 times.

I’d expected it to be far more expensive, given that the Barclays share price has rocketed 79.17% over the last 12 months.

Can the Barclays share price keep soaring?

The big banks have done well this year but Barclays has the added kicker of exposure to the US via its investment banking arm. It may therefore benefit from the Trump trade.

Better still, it appears to have minimal exposure to the motor finance scandal. That’s in marked contrast to FTSE 100 rival Lloyds Banking Group, whose shares have taken a beating as a result.

Barclays may also benefit from the growing sense that interest rates are set to stay higher for longer. This will allow banks to maintain their net interest margins, the difference between what they pay savers and charge borrowers.

The business is still bombing along. On 24 October, Barclays reported a profit before tax of £2.2bn in Q3, up from £1.9bn a year earlier.

Banking will always be risky, especially given today’s economic and geopolitical worries, notably in the domestic UK market. Barclays’ dividend yield has slumped to 3.31%, which is on the low side. My biggest worry is that its shares my idle or even retreat after their stellar run. I’m still planning to buy it when I have the cash though.

Gosh, National Grid shares look cheap

Transmissions giant National Grid (LSE: NG) may not look staggeringly cheap with a P/E of 11.76 times, but personally, I was astonished. I’ve got used to it trading at 15 or 16 times earnings, pretty much every time I looked. That’s exactly fair value.

I’d always pinned its rock steady valuation on the fact that National Grid is a natural monopoly with regulated earnings, so investors pretty much knew what they’re getting.

Then again, it’s been a funny year for National Grid. Its share price plunged in May after the board announced a £7bn rights issue to support £60bn of capital investment over the next five years. That’s not the sort of thing investors expect from this stock. It bounced back pretty sharply, though, as investors snapped up the chance to top up their stake at a reduced price.

It’s dipped 3.91% over the last month after the board reported a 50% drop in pre-tax profits 50% to £684m on 7 November. However, profits did climb 26% to £1.43bn on an underlying basis. Over 12 months, the National Grid share price is up a modest 5.84%.

The trailing yield is a bumper 5.8%, giving a solid total return. I’ll confess that I’m concerned by National Grid’s £43.6bn net debt pile and the demands of infrastructure investment. But if I don’t buy the stock at today’s reduced price, I never will.

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.

Harvey Jones has positions in Lloyds Banking Group Plc. The Motley Fool UK has recommended Barclays Plc, Lloyds Banking Group Plc, and National Grid 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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