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.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

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 Rio Tinto 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 Rio Tinto made the list?

See the 6 stocks

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 PriceZoom1M3M6MYTD1Y5Y10YALL7 Apr 20204 Apr 2025Zoom ▾Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '24Jan '25202120212022202220232023202420242025202550100150200250www.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.

But what does the head of The Motley Fool’s investing team think?

Should you invest £1,000 in Rio Tinto 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 Rio Tinto 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.

Our best passive income stock ideas

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Investing Articles

Up 30% in weeks, does the BAE Systems share price still offer value?

The BAE Systems share price has been on a tear over the past couple of months. This writer sees limited…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Hunting for shares to buy as the market trembles? Remember this!

After a choppy week in global stock markets, our writer goes back to basics in his hunt for bargain shares…

Read more »

Investing Articles

3 simple principles to help build wealth in an ISA

As a new tax year opens up new ISA allowances for many investors, our writer shares a trio of things…

Read more »

Investing Articles

US trade tariffs: what they could mean for UK shares like Ashtead, Compass Group, and Experian

US trade tariffs continue to rock global markets, and the UK is no exception. Our writer considers how a new…

Read more »

Mindful young woman breathing out with closed eyes, calming down in stressful situation, working on computer in modern kitchen.
Dividend Shares

The Trump slump has smashed these FTSE 100 shares!

After a rough week for US and UK shares, investors have been shaken. But now these FTSE 100 stocks have…

Read more »

Investing Articles

£10,000 invested in Rolls-Royce shares 5 years ago is now worth…

Rolls-Royce shares have been on fire since April 2020. Part of this is the result of pandemic restrictions lifting, but…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

£10,000 invested in Tesla stock at its peak in 2024 is now worth…

Over the last few months, Tesla stock has lost nearly half its value. Here, Edward Sheldon explores a few takeaways…

Read more »

Investing Articles

Is the S&P 500 heading for an epic stock market crash?

Our writer shares his thoughts on a very crazy time for the S&P 500 and the wider stock market. How…

Read more »