UK share markets had a right old tear up on Monday afternoon. The FTSE 100 roared to five-month highs above 6,200 points on positive news surrounding a Covid-19 vaccine. It’s raised hopes that the global economy really could rebound strongly in 2021 and drive profits from UK shares significantly higher from this year’s likely levels.
Stock pickers should be prepared for more volatility. It’s too soon to call Pfizer’s vaccine contender a silver bullet that will end the Covid-19 crisis. And bad news on this front would send UK share prices crashing through the floor again. Conversely, proof that the drug is the breakthrough the world’s waiting for could push stock values through the stratosphere again.
3 cheap UK shares on my radar
As a UK share investor, I’ve continued to invest in my Stocks and Shares ISA in 2020. And I’ll continue to do so regardless of whether stock markets sink or surge in the weeks and months ahead. If anything, another stock market crash might encourage me to open my wallet a bit wider. The opportunity to snap up some top-notch bargains will be even greater.
In my opinion, there are already plenty of quality UK shares trading at unmissable prices right now. Here are a few I’m thinking of adding to my Stocks and Shares ISA before too long:
- ContourGlobal offers stacks for value investors to get their teeth stuck into. The power station constructor boasts a monster 6% dividend yield for 2020. It trades on a forward price-to-earnings growth (PEG) ratio of 0.1 too. This is based on expectations that earnings will rocket 280% year-on-year in 2020. The defensive nature of this UK share’s operations make it a safe buy, whatever fate awaits the global economy.
- The same exceptional earnings visibility is what makes BAE Systems such a brilliant buy today. The depressing inevitability of war means this FTSE 100 stock can expect demand for its defence products to remain solid whatever broader macroeconomic conditions are like. This is why City analysts expect earnings to soar 14% in 2021 (a 6% reversal is expected for this year due to earlier Covid-19-related production issues). Today, this UK share trades on a forward price-to-earnings (P/E) ratio of 10 times. And it carries a chunky 5.8% dividend yield. I think this tier 1 defence contractor is too cheap to miss.
- Prudential doesn’t offer the sort of mighty dividend yields as the two shares mentioned above. In fact, its yield sits at a quite modest 1.6% for 2020. Yet I believe its forward P/E ratio of 8 times makes it worthy of serious attention from value chasers. Annual earnings are expected to rise 6% in 2021, following a predicted 4% fall this year. And I expect this FTSE 100 share’s profits to recover strongly in the 2020s as demand for financial products in emerging markets rips higher.
Royston Wild owns shares of Prudential. The Motley Fool UK has recommended Prudential. 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.