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Why I’d ignore the TUI share price and buy other cheap UK shares

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The TUI (LSE: TUI) share price looks to be one of the top cheap UK shares after its recent declines. At the time of writing, the stock is trading at around 350p. That’s significantly below its five-year high of 1,180p, printed in May 2018. 

Unfortunately, the share price only tells us part of the story

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The falling TUI share price

The value of the company has fallen as its revenues have collapsed. Revenues were €486m (£426m) in the three months to December, down from €3.9bn a year earlier, as coronavirus lockdowns and travel restrictions took their toll. 

The good news is that the company is expecting a recovery in 2021. The operator said it had received 2.8m bookings for summer breaks so far in its latest trading update. That’s an improvement, yes. But it was just more than half of 2019 levels. 

Even in the most optimistic scenario, City analysts do not expect the company to return to profit until 2022. Of course, this is just a projection.

The company could perform better or worse than expected. Unfortunately, until we have some more certainty on how the vaccine rollout is affecting coronavirus infections around the world, it’s impossible to tell what the future holds for the business and the TUI share price at this stage. 

This is why I’d ignore the stock any buy other cheap UK shares instead. 

UK shares on offer 

There are a handful of other stocks I’d rather buy for my portfolio right now. 

These are mainly recovery plays, like the TUI share price. However, I think these businesses have a brighter outlook because they depend less on the international travel market and more on UK consumer trends. 

For example, shares in banking giant Barclays look incredibly cheap right now. Investors have been selling the stock due to concerns about its exposure to the UK economy.

Nevertheless, so far, the impact on the business has been relatively limited. This might not continue indefinitely. If the economy takes a turn for the worst, Barclays could see a sudden increase in loan losses and drop-in profitability. 

However, management’s recent decision to initiate a £700m share buyback and reinstate the dividend gives me confidence that the lender is getting back on track. That’s why I would buy the company as part of a diversified basket of cheap UK shares over the TUI share price today. 

Another group I have my eye on is telecommunications giant BT. Demand for this company’s services has only increased over the past year as working from home has become the standard.

But this hasn’t stopped investors from deserting the business. The decision to cut its dividend significantly impacted investor sentiment towards the enterprise. 

I think the stock has been oversold. BT has performed better than many of its FTSE 100 peers through the crisis. That’s why, despite the challenges facing the business, such as its high level of debt and rising costs, I would buy the stock as part of a portfolio of UK shares today. The firm is not without its challenges, but unlike TUI, the challenges facing this business are not life or death. After all, the travel operator has already been bailed out three times during the past year

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Barclays. 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.

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