I asked ChatGPT to name 3 cheap shares with massive recovery potential – I own two of them!

Harvey Jones decided to use a little artificial intelligence to supplement his own. After asking ChatGPT to tip three cheap shares he was in for a surprise.

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I’m always on the lookout for cheap shares to add to my portfolio of FTSE stocks, as I can’t resist a bargain. I prefer buying top companies when they’ve fallen out of favour, as this typically means a lower entry price and higher yield. Betting against the market takes patience and strong nerves though. Troubled companies can take years to turn around.

When I asked artificial intelligence chatbot ChatGPT to name three FTSE shares with low valuations but high recovery prospects, I was pleased to find I already hold two of them.

Not that I treat ChatGPT as infallible – far from it. Still, I couldn’t fault the chatbot’s logic: “Investing in undervalued FTSE 100 shares that have underperformed recently can offer substantial growth potential as they rebound”.

Should you invest £1,000 in Burberry Group Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Burberry Group Plc made the list?

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JD Sports Fashion’s been a losing bet so far

Unfortunately, its first pick, JD Sports Fashion (LSE: JD), has yet to prove the point. The trainer and sportswear retailer has had a volatile 12 months, with the shares down 28% after repeated profit warnings. Over three years, they’re down 57%.

Created with Highcharts 11.4.3JD Sports Fashion PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

I’ve been averaging down, tempted by its strong UK presence and expanding international operations, particularly in the US. As ChatGPT notes: “The company’s extensive store network and growing online platform position it well to capitalise on consumer demand for athletic and leisure apparel”.

JD Sports also looks great value, trading at just 6.8 times earnings. Yet it operates in a tough retail environment that demands constant investment in marketing and innovation. Fashion’s vulnerable to changing trends. Has athleisurewear finally had its day?

I think not. I’m backing JD Sports to recover as interest rates fall and the economy improves, even though the shares continue to head south.

Retail’s a challenging sector, so it’s no surprise ChatGPT’s second pick is also in this space – albeit at the luxury end: Burberry Group (LSE: BRBY).

Burberry has also issued profit warnings, due to falling demand from both China and the West. Its brand suffered after marketing missteps, prompting new CEO Joshua Schulman to admit the group’s “niche aesthetic” had “skewed to a narrow base of luxury customers”.

Investors have bought into his plans to refocus on Burberry’s heritage, with shares up almost 50% in the last three months. They’re still down 17% over one year and 46% over three. The valuation’s climbed to almost 14 times earnings.

Created with Highcharts 11.4.3Burberry Group Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

The recovery has begun, but delivery’s crucial. Full-year results, due tomorrow (24 January), will tell us more.

Can Prudential shares finally fight back?

ChatGPT’s final pick is insurer Prudential (LSE: PRU), which is focused on Asia and Africa. I don’t own this one, which is perhaps fortunate, given the shares are down 20% over 12 months and 50% over three years.

Created with Highcharts 11.4.3Prudential Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Still, the stock looks attractive, trading at just nine times earnings. As ChatGPT notes, Asia and Africa are “high-growth markets with increasing demand for insurance and financial services”.

Prudential’s strong brand and extensive distribution network provide a solid foundation for long-term growth. Like Burberry, it would benefit massively from a Chinese recovery, but that remains a distant prospect, in my view. The shares are cheap, valued at nine times earnings.

I’ve been tempted by Prudential before, but I’m already heavily invested in financials. For now, I’ll stick to my other picks and hope patience pays off.

Should you invest £1,000 in Burberry Group Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Burberry Group Plc made the list?

See the 6 stocks

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 Burberry Group Plc and JD Sports Fashion. The Motley Fool UK has recommended Burberry Group Plc and Prudential 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.

Like buying £1 for 51p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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