3 embarrassingly cheap shares that I’d invest in

These cheap FTSE 350 shares are trading on low P/E ratios and have plenty of turnaround potential.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Even with the stock market recovering well from its steep March fall, there are opportunities for savvy investors to pick up shares that are still very cheap.

A discount on a range of companies and assets

One such share I think is Temple Bar Investment Trust (LSE: TMPL) which has a dividend yield of over 7%. On top of that, the discount to net asset value is around 10%. This is a great combination and makes the shares great value in my opinion.

The trust has a gearing of around 13.3% which is higher than some other similar trusts and this does add some risk, especially when the market falls.  

At the end of March, the trust had Royal Dutch Shell and Barclays and RBS as its third, fifth, and sixth biggest holdings respectively. It’ll be interesting to see if that’s changed in light of dividend cuts.

13.3% of the trust is in cash with further hedges provided by 2.9% being in physical silver and gold. The heavy weighting towards big UK companies at a time of dividend cuts is slightly concerning, but for now, I think the big cash position should see it through.

The limping asset manager

Jupiter Fund Management (LSE: JUP) combines a yield of 7.5% with a price-to-earnings ratio that is under eight. This indicates to me that the shares are very cheap.

Jupiter is looking to scale up its business by buying growth. In February Jupiter agreed to acquire Merian Global Investors for £370m. It has since stated the deal will go ahead despite the economic uncertainty at the moment.

Both asset managers have been hit by outflows which makes the deal challenging but Merian does have margins of around 50% which is very high, even in this industry. Merian will also boost earnings per share from 2021 as well which is good for management and shareholders.

This isn’t a business that’s firing on all cylinders, but that gives it the potential to recover from a low base. I think the shares look cheap and could be worth a look, especially with a long-term mindset.

Relying on squeezed marketing budgets

WPP (LSE: WPP) is one of those businesses that suffers during a downturn. But assuming any economic downturn isn’t too long-lasting I expect it offers value at the current depressed price. I’m tempted to pick up more of the shares.

That’s because the P/E is now under eight, which puts it on a very similar level to Jupiter. What that shows is many investors are fearful for the future. But if management can keep slimming the business down and further cut debt, while keeping the agencies in the business performing well, then I’m optimistic about WPP’s future.

Conventional wisdom is that companies should reduce marketing spend during a recession. However, there is academic evidence that actually it might be the best time to spend and gain market share, as less well-financed competitors struggle. If enough companies take this view, WPP could do well and for now, the shares are embarrassingly cheap. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Andy Ross owns shares in WPP. The Motley Fool UK has no position in any of the shares mentioned. 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.

More on Investing Articles

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Dividend Shares

How much passive income could I generate with just £10 per day?

Ken Hall wants to create his £10,000 yearly passive income dream by investing just £10 every weekday day in Footsie…

Read more »

Investing Articles

Is the Rolls-Royce share price too high? Here’s what the experts say

The Rolls-Royce share price has surged over two years, representing one of the FTSE 100’s greatest success stories. But is…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

A top S&P 500 growth share and an ETF I’d buy this November!

I think this S&P 500 share and exchange-traded fund (ETF) could be brilliant additions to my ISA or SIPP right…

Read more »

US Stock

Here are the best-performing S&P 500 stocks after the US election result

Jon Smith notes some of the largest gainers from the S&P 500 yesterday and explains how the election result has…

Read more »

Growth Shares

2 UK stocks knocking on the door of promotion to the FTSE 100

Jon Smith points out a couple of UK stocks that he feels could be ready for the big league based…

Read more »

Investing Articles

Rolls-Royce shares just fell 7%. Is it time to buy?

This investor in Rolls-Royce shares takes a look at the FTSE 100 engine maker's trading update to see what caused…

Read more »

Young Black woman looking concerned while in front of her laptop
Investing Articles

What’s going on with the Auto Trader share price?

Paul Summers takes a closer look at why the Auto Trader share price has tumbled despite the company posting higher…

Read more »

Investing Articles

Legal & General shares look set to give me a mind-blowing 10.22% yield in 2026!

Harvey Jones is getting a brilliant second income from his Legal & General shares and expects even more to come.…

Read more »