The Motley Fool

Forget gold! Here are 2 cheap UK shares I’d buy and hold long term

Image source: Getty Images

There’s no question in my mind that investors have a wealth of cheap UK shares to choose from today. 2020’s triple blow of Covid lockdowns, Brexit and economic uncertainty have kept share prices low. 

And a rush for so-called safe-haven investments mean many investors have been loading up on gold. The price of the precious metal has spiked more than 20% in the past 12 months. 

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

But it’s clear to me that investors can get far more robust returns from cheap UK shares. And I’d definitely swerve gold for the chance to buy quality companies at bargain prices. 

So I’ve handpicked these two cheap UK shares I’d buy now and hold long term.

Success starts at home

In my opinion there are a couple of choice bargains to be had right now. The first of these cheap UK shares I’m considering is FTSE 100 retailer Kingfisher (LSE: KGF). Some readers might see the word ‘retail’ and immediately snort in derision. But ignoring this option would be a mistake, in my opinion.

The B&Q and Screwfix owner is labelled an ‘essential’ retailer. As such it has been able to open its stores to trade throughout the pandemic. 

Things went so well that Kingfisher was able to return £130m in Covid rates relief to the government. The business had seen a huge sales bump, driven by “higher interest in home improvements”, bosses noted.

Sales in the fourth quarter of 2020 were up another 16.5%, it said in its latest trading update. Significantly stronger sales growth in Spain (up 20.4%) and France (up 29.4%) also means full-year profits are now expected to be at the top end of expectations.

A P/E ratio of 10 is well below the FTSE 100 average. That makes these UK shares rather cheap.

And while Kingfisher scrapped its final dividend payout for 2020, I think it’s clear it will return in force in 2021. 

Another cheap UK share

My next pick for UK shares offering high value is British American Tobacco (LSE: BATS)

The BATS share price is on sale at just 8.4 times earnings. That puts the company in my sweet spot. But even better, the tobacco specialist pays out a 7.7% dividend yield today. 

I’ve learned that compounding strong dividend returns over the long term offers me the best chance to grow the most wealth. 

And I’ve heard that management now expects full-year revenue growth at the top end of estimates, with the hit from Covid much lower than anticipated. 

Profits and earnings per share remain strong as it switches resources away from cigarette sales to vaping. And looking further out, analysts at Morgan Stanley say the company’s ability to grow is underappreciated. 

We see a significant opportunity in BAT’s new model, just as the shares and investor interest hit multi-year lows,” they wrote.

While this share won’t appeal to ESG investors, it could offer me a healthy portfolio boost if I hold it for long enough. 

So I’d ignore gold right now and focus my attention on these two cheap UK shares. Over the long term, I think they are more likely to help me grow my wealth for the future.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

TomRodgers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.