I frequently search for cheap UK stocks to add to my Stocks and Shares ISA. Both of the companies that I’m considering today are related to the automotive sector.
UK stocks in the driving seat
First up on my list is the UK’s largest vehicle marketplace, Autotrader (LSE:AUTO). With a rich 40-year history, its brand is known to 90% of consumers. The business started as a classified ads magazine but today it’s 100% online.
Several numbers can explain why I like this FTSE 100 firm. It attracts over 50 million cross-platform visits each month. Visitor numbers to the site are not only large, but also engaged with a 75% share of minutes spent across all vehicle platforms.
Recently, in its half-year results for the six months ending 30 September, it reported its highest-ever six-monthly revenue and profits. This prompted its share price to jump to an all-time-high. So is it too late for me to buy this share now? I don’t think so.
I believe Autotrader is continuing to innovate and is managing to successfully add new features and partner with more retailers. There’s plenty of growth potential left, in my opinion.
The Autotrader brand is a key part of the investment case for me. But if it were to lose the trust in which it’s held or receive negative publicity, I’d be more wary. Also, if supply chain disruptions were to continue, this could lead to a fall in manufacturers spending on the platform.
Overall though, given the brand and growth prospects, I think this UK stock could be too cheap for me to miss.
Electric growth
My second pick today is high-quality cable manufacturer Volex (LSE:VLX). It’s related to the automotive sector as it supplies cables for electric cars. With a UK ban on new petrol and diesel cars coming into force in 2030, demand for electric cars should grow significantly. Volex is already seeing signs of this in its business. It achieved excellent sales growth of 210% year-on-year in this part of the market.
Another point I like about Volex is that it’s diversified across several high-growth sectors. In addition to electric cars, it also supplies fast-growing data centres and specialised medical equipment.
I like that the company management has ‘skin-in-the-game’ too so should be more aligned with shareholder interests. CEO and Executive Chairman Nat Rothschild has a whopping 24% holding, and recently bought more shares. This gives me some confidence.
Recently, in its half-year results, it reported strong sales growth of 44.5%. Encouragingly, profit also increased, by 31%.
That said, global component shortages and shipping issues are affecting the business. Volex says that it has managed these challenges well, but it’s something I will be keeping an eye on over the coming months. Also, much of its future growth will come from acquisitions. Risks are involved when trying to buy and integrate another company. So far, Volex has managed the process well, but I’ll be watching for signs that it’s stumbling.