A bank holiday is always a good time to relax. It’s also a time when I can catch my breath from the business of a normal working week. As part of this, I can take some time to think about my investment portfolio, and any changes I might want to make. In that theme, here are a few cheap UK shares that I’m thinking of buying at the moment.
Splitting my money across key areas
With a pot of £2,000 to invest, I want to find four UK shares. My thinking is that each one gets £500. This is enough to benefit if the stock takes off, but enough of a selection to offer some diversification.
I want to choose one or two stocks from each of my favourite sectors at the moment. Personally, I like healthcare, renewable energy, finance and consumer staples. However, it doesn’t mean that all of the companies in this sector are cheap right now.
To tailor my search, I want to try and find the shares that are undervalued either from a financial angle, or from my personal point of view.
Cheap UK shares from finance
First up is the finance sector. Legal & General is a stock I like, with a current price-to-earnings (P/E) ratio of 9.55. This ratio is a measure I often use to try and find cheap UK shares. If the ratio is around or below 10, I’d rank it as being good value to buy.
Legal & General also offers me an attractive dividend yield of 7.52%. This is a perk, as even if the share price doesn’t rally as I’d expect, I can pick up valuable income from the dividend in the meantime.
Another share in this sector that I think is cheap is Hargreaves Lansdown. I recently wrote about the stock in detail, as it reached fresh 52-week lows. Even though the company has struggled over the past year financially, I see two positive signs. Firstly, assets under management grew by 20%, it said in the latest half-year report (versus the same period last year). Secondly, the push in strategy towards wealth management could be lucrative further down the line.
Ideas from consumer staples
Consumer staples refers to everyday goods and services that we need. I like this sector due to the resilient demand seen despite the state of the economy.
One company I’m considering buying shares in is Royal Mail. With a P/E ratio of just 5.7, it does look very attractive from a valuation point of view.
I need to be careful as this cheap UK share isn’t now benefiting from the pandemic surge of parcel deliveries as it did when we all ordered online during lockdowns. However, the profitability and growth that this fuelled should give it enough momentum to be able to operate at a higher efficiency level than pre-pandemic.
Finally, I think that Kingfisher is also worth looking at. The 2021 results noted a “year of record revenue and profits” for the business. Yet with a P/E ratio of 9.11, I don’t think the market has fully priced in the potential upside for 2022, despite potential inflationary cost issues.
I accept that all of these shares have risks — both linked to their own businesses and the economic backdrop. But I like them all the same.