I don’t see the price crash of the last few days as a reason to panic. Rather, I see it as a perfect opportunity to buy great British shares at bargain prices.
I invest based on the return I can expect in the long term, because stock markets always recover strongly after corrections and crashes.
By getting in at the bottom, I have a chance to increase my future returns. So which stocks am I looking at today? Here are two of my favorites — along with a top-notch exchange-traded fund (ETF) — that I’ll consider buying the next time I have money to invest.
All-rounder
Vodafone Group (LSE:VOD) shares look dirt cheap in many ways. The price-to-earnings (P/E) ratio is just 9.9, while the corresponding dividend yield for this year is 7.3%.
And the FTSE100 The telecommunications giant is trading at a price-to-book (P/B) ratio of just 0.4. Any value below 1 indicates that the stock is undervalued.
Vodafone’s share price has fallen sharply on concerns about a US recession and its global impact. However, telecoms earnings remain broadly stable over the course of the economic cycle, which leads me to believe that this sell-off is unjustified.
On the other hand, the company faces significant competitive pressure. Nevertheless, I believe Vodafone has excellent investment potential as our increasingly digitalised lives drive demand for telecommunications.
Defensive star
Babcock International GroupShares in (LSE:BAB) also appear very cheap at current levels. City analysts expect annual profits to rise by 42% this fiscal year. The defense giant is therefore trading at a price-earnings-growth ratio (PEG) of 0.3.
As with the P/B ratio, a value below 1 indicates exceptional value.
Just like Vodafone, Babcock operates in a very defensive sector, so earnings should not be affected by broader economic conditions. In fact, the outlook here is quite encouraging, with the deteriorating geopolitical situation prompting companies to quickly upgrade.
However, I must remember that defense contracts can be unpredictable, a problem that can negatively impact share prices and dividends.
A top fund
The iShares Edge MSCI World Value Factor UCITS ETF (LSE:IWVL) was founded to “to identify undervalued stocks in relation to their fundamentals.” Today, the company holds 399 shares in North America, Europe and Japan, which in turn offers investors an excellent opportunity to diversify their risk.
As the past few days have shown, the fund is not immune to periods of extreme volatility, but its focus on cheap stocks could limit price declines if market conditions deteriorate.
For example, the company is heavily involved in the semiconductor industry, but has diversified away from expensive NVIDIA Stocks. Instead, they have opted for companies like Intel And Qualcomm.
These companies trade at P/E ratios of 19.9 and 16.1, respectively. Both values are well below the price-earnings ratio of 39.5 for Nvidia shares.
Almost a quarter of the ETF’s money is in information technology stocks, so the fund could be very vulnerable in the event of a recession in the US. But overall, I still think it’s a great fund to consider.
The post “2 dirt cheap UK stocks and a cheap ETF I’d buy after the sell-off!” first appeared on The Motley Fool UK.
Further reading
Royston Wild does not own any of the stocks mentioned. The Motley Fool UK has recommended Nvidia, Qualcomm and Vodafone Group Public. The views expressed on companies mentioned in this article are those of the author and may therefore 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.
Motley Fool UK 2024
