If I decided to £5,000 today, I would target stock market bargains. I think these shares could benefit most from the reopening of the UK economy.
With that in mind, here are five such bargains I would acquire.
Stock market bargains
One sector of the economy that is seeing a rapid recovery is the second-hand car market.
The used car market is reporting explosive growth as the demand for vehicles outpaces supply. I think the market for new cars could see similar growth as the economy reopens as well. And with that being the case, I would buy Marshall Motor Holdings and Vertu.
Both of these firms sell new and used vehicles, and both stocks currently look cheap. Shares in Marshall are dealing at a forward price-to-earnings (P/E) multiple of 8.6. Meanwhile, shares in Vertu are selling at a P/E of 8.1.
The risk both corporations face is the risk that demand for vehicles won’t recover. In this case, profits will remain depressed, which is likely to impact both companies’ shares. Still, as cheap recovery plays, I would buy the two stocks for my portfolio with £5,000.
I think there could also be some attractive recovery opportunities in the financial sector. Secure Trust and Barclays are the two stocks I’d buy in this sector.
Secure Trust, which primarily focuses on lending to the business and consumer sectors, is a small company compared to Barclays.
However, the stock is currently trading at a forward P/E of 7.2, which looks incredibly cheap compared to its recovery potential in my eyes.
Meanwhile, as one of the country’s largest banks, Barclays should benefit from a general economic recovery across the UK. As consumer and business confidence improves, demand for loans may rise. Consumer spending is also increasing, which could push profits higher at the group’s Barclaycard credit card business.
The most considerable risk facing both companies is the risk that the UK will be forced into another economic lockdown. This could cause loan impairments and other additional costs, which may negatively impact profitability and both firms’ balance sheets.
The final company I would buy for my £5k portfolio and cheap stocks is specialist bank and asset manager Investec. Shares in the group are currently changing hands at a forward P/E of 7.6. As well as this discount valuation, the stock also offers a dividend yield of 6.2%.
I think Investec’s earnings could jump as the UK and global economies return to growth. The group may also see demand for its wealth management services expand as consumers look for somewhere to invest their pandemic savings.
Unfortunately, there is plenty of competition on the market. This is the biggest challenge Investec faces and the most significant risk hanging over its growth outlook. Competition in the wealth management and specialist lending sector is fierce. If the company does not offer something unique, customers will go elsewhere.
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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Barclays and Vertu Motors. 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.