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A cheap UK stock to buy before the ISA deadline!

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The deadline is approaching for investors to use their ISA allowance for this tax year. So I’m on the hunt for the best UK stocks to buy for my Stocks and Shares ISA. Here’s an attractive and super-cheap British stock I’m thinking of buying right now.

Going for gold

Gold prices have come off the boil in recent weeks as risk appetite across financial markets has improved and yields on US Treasuries have risen. But I don’t think the yellow metal’s race to new record peaks above $2,000 per ounce is run. I suspect that UK mining shares like Petropavlovsk (LSE: POG) could rise again and rise strongly.

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Precious metals like gold are bought by investors as a hedge against inflation. When the value of paper currencies comes under attack from low interest rates and huge monetary stimulus, demand for hard currencies like bullion increases as a result. Gold’s fall to nine-month lows below $1,700 per ounce in recent sessions shows that this idea is yet to play out. But fears over inflation are growing, and I think this could propel gold prices upwards again.

Many City analysts believe that another gold price spurt is on the horizon. It’s why they think earnings at metal digger Petropavlovsk will soar more than 250% in 2021.

Gold bullion on a chart

Room for more rate cuts?

Fears over a long period of low central bank rates, and their impact on the global economy, are rife today. But a report by the International Monetary Fund suggests that even those banks that have introduced negative rates during the past decade might be able to reduce them even further without derailing the financial system.

The IMF says that “the evidence so far indicates negative interest rate policies have succeeded in easing financial conditions without raising significant financial stability concerns.” There’s no guarantee that central banks will act on its findings, of course. But the report will likely be viewed keenly by institutions, including the Bank of England, which have publicly touted the possibility of negative rates being rolled out.

On top of those inflationary concerns, other macroeconomic and geopolitical factors could also drive bullion prices — and with it profits at UK gold shares like Petropavlovsk — higher. Setbacks in the fight against Covid-19 and resurgent trade spats between major economies, for example, are just a couple of things that could boost demand for safe-haven assets like precious metals.

A top UK value share

It’s not certain that gold prices will soar back to last summer’s record peaks though. Signs of a sustained economic recovery would surely damage demand for flight-to-safety assets like this. And Petropavlovsk itself exposes UK stock investors to risk as exploration and production problems — issues that are extremely common in the mining industry — can seriously dent future earnings.

I still think Petropavlovsk’s cheap share price makes it a good buy today though. Not only does the company trade on a low price-to-earnings (P/E) ratio of 8 times for 2021, it carries an inflation-beating 2.1% forward dividend yield as well.

A Top Share with Enormous Growth Potential

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Not only does this company enjoy a dominant market-leading position…

But its capital-light, highly scalable business model has previously helped it deliver consistently high sales, astounding near-70% margins, and rising shareholder returns … in fact, in 2019 it returned a whopping £150m+ to shareholders in dividends and buybacks!

And here’s the really exciting part…

While COVID-19 may have thrown the company a curveball, management have acted swiftly to ensure this business is as well placed as it can be to ride out the current period of uncertainty… in fact, our analyst believes it should come roaring back to life, just as soon as normal economic activity resumes.

That’s why we think now could be the perfect time for you to start building your own stake in this exceptional business – especially given the shares look to be trading on a fairly undemanding valuation for the year to March 2021.

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Royston Wild 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.

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