Renewables investing will be one of 2021’s key trends, in my view, so I’m investing in cheap UK shares to boost my portfolio.
I’m looking at everything from key battery metals to electric vehicle charging.
It’s clear to me from the way things are going that these industries will boom over the next 10 to 20 years. So I want to pick up cheap UK shares now and dine out on the profits for a long time.
AIM-listed Volex (LSE:VLX) is a lesser-known cheap UK share that has quietly accrued a £500m market cap.
Volex manufactures power cords and cable assemblies for electric vehicles. It’s not flashy. It gets on with the job at minimal fuss. But the numbers look good. Half-year results to 4 October 2020 showed earnings per share up 92% and profit before tax climbing 36.6%. Volex also paid its first dividend in 2020.
So I believe Volex could provide me with an attractive mix of income and share price growth.
If I tuck away these shares in my ISA and come back in 12 months, I think this could easily be a billion pound company. With earnings growth of over 30% expected next year, and a high profitability ratio, I feel that investing here could be the best decision I make all year.
Cheap UK shares: Sylvania Platinum
At a P/E ratio of less than 10, forward P/E of just 6.5 and a PEG ratio of 0.3, Sylvania Platinum (LSE: SLP) one of my favourite cheap UK shares. Not only does it pump out platinum group metals (PGMs) — key for EV engines — from its mines in South Africa, it does so in an extremely cost-effective way. Margins are sky high from its low-cost tailings operations.
SLP also produce rhodium. Prices of the metal are soaring as demand outstrips supply. It’s one of those commodities that is difficult to find and hard to mine economically. And it’s critical for reducing poisonous nitrogen oxide emissions by its use in catalytic converters.
I’m happy the company is using its cash wisely: profit margins boomed to 47% in FY19 results. Returns on capital and equity both sit above 30%, while net cash improved from £55m to £60m With zero debt on its balance sheet, I see SLP as a winner for me.
Greencoat UK Wind
Cheap UK shares in wind energy producers are few and far between. But the government wants to use wind power to generate electricity for every UK home by 2030, so investing here is vital to me.
Greencoat UK Wind (LSE: UKW) is one of those steady performers that doesn’t see a lot of share price volatility. I did own UKW in 2020, but foolishly sold out to seek bigger thrills elsewhere. In doing so I fundamentally mistook how long I would hold the shares for. I see these cheap UK shares now as a 20-year investment, not a 20-month one.
UKW consistently trades at a premium to its 118p Net Asset Value, suggesting very strong investor support. Certainly, long-term holders seem to appreciate the way management invests capital to expand the portfolio of onshore and offshore wind farms. But now is a relatively cheap time for me to pick some up.
It pumps out a very attractive 5.1% dividend yield. If I compounded that growth by reinvesting dividends in my ISA, I could build a healthy position in this cracking company.
TomRodgers owns shares of Sylvania Platinum. The Motley Fool UK has recommended Greencoat UK Wind. 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.