It’s fair to say that the first nine months of 2022 have been tough for investors. However, I think that these conditions present an opportunity to add three cheap UK shares to my portfolio.
Consistently elevated inflation and economic slowdown have both contributed to many shares falling, and general indices being down far below pre-2022 levels. This can certainly be disheartening, and make it difficult to decide where the best place to invest is.
Although often hidden amongst mass sell-offs, good quality companies trading at a discount can be found, and these are the ones I would want to add to my portfolio.
Bellway
The first on my list is Bellway. The company is the fourth largest residential property developer in the UK, and has had a very tough 2022. The share price is down 42.5% since the start of the year, and over 55% from pre-pandemic levels.
Despite this, the company has good fundamentals, with strong profit margins, minimal levels of debt, and a low price-to-earnings ratio. There are, of course, several serious headwinds that Bellway will have to contest with. Rising interest rates and the cost-of-living crisis may start to dampen demand for new-build house purchasing.
Nonetheless, I believe that the company still represents a good opportunity, and I would consider adding this share to my portfolio.
Marks & Spencer Group
The second on my list is Marks & Spencer Group. The company operates as a multichannel retailer. It focuses predominantly on food, clothing, and home products. Despite a strong 2021, the shares have suffered recently, down 54% in 2022.
Despite this fall, the company continues to provide a significant dividend yield, reasonable profit margins, and strong earning efficiency. I would add that the company has struggled recently with keeping profit levels consistent, and top-level earnings growth has been fairly stagnant.
That being said, I would still consider adding Marks & Spencer to my portfolio given the good value I believe it now represents.
Crest Nicholson Holdings
The final cheap UK share on my list is Crest Nicholson Holdings, the residential housebuilder primarily operating in the south of England. As with the previous two companies, Crest Nicholson has struggled in 2022, falling 43.8% in 2022, and almost 60% from pre-pandemic levels.
I believe the company still presents a good opportunity. It has strong profit margins, a low price-to-earnings ratio, and a significant forecast dividend of 8.1%. Once again, given this company is a housebuilder, there are several sector-wide risks, such as reduced demand and house price falls.
However, I would still consider adding this company to my portfolio, given the recent fall in share price.