As the economy starts to rebuild after the pandemic, I’ve been looking for cheap UK shares to add to my portfolio ahead of the full reopening in July.
Here are five cheap-looking companies I’d buy in July.
Cheap UK shares on offer
The first is Marshall Motor Holdings. As the economy reopens and consumer confidence grows, I expect demand for new vehicles will also increase. This should lead to increased sales and profits at this car retailer.
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It’s been able to navigate the pandemic by relying on second-hand car sales. It’s now primed to grow in the years ahead as the economy recovers.
However, another economic downturn could hurt demand for vehicles, which would set back the recovery at Marshall Motor.
To diversify my investments, I’d also buy Vertu Motors for my portfolio of cheap UK shares. I expect both companies to return to growth as the economy reopens.
That said, they operate in an incredibly competitive market, which may put profit margins under pressure. Meanwhile, further pandemic woes could also suppress demand.
Marshall trades at a forward price-to-earnings (P/E) multiple of 8.6 while Vertu trades at a forward P/E of 7.3.
Financial sector
Elsewhere, I’d also buy Secure Trust Bank and H&T for my portfolio of cheap UK shares.
These financial stocks target two different segments of the market. H&T provides pawnbroking and short-term loans, while Secure Trust offers business and consumer finance products, including loans.
Secure Trust trades at a forward price-to-earnings (P/E) multiple of 6.7 while H&T trades at a forward P/E of 10.6.
As the economy reopens, I think consumer confidence will improve. With the job market recovering, workers may feel more secure about their employment prospects. This may mean they’re more likely to take out loans to finance big purchases.
As such, both Secure Trust and H&T may profit from rising demand for their services from their different market segments. That’s why I’d buy both stocks in July.
One key challenge both firms face is competition from larger lenders who’re sitting on big piles of cash to lend. This could depress profit margins. Another lockdown may also restrict demand for lending.
Fast fashion
The final stock I’d buy for my portfolio of cheap UK shares in July is N Brown. I think clothing retailers may see a bump in revenues as consumer confidence improves during the next few months.
N Brown is well-positioned to capture some of this business as it it’s a digital specialist-fit fashion retailer. This could help it capture market share in its niche sectors.
Sales across the group slumped last year, but profits are expected to jump back to life this year. And based on these projections from the City, the stock is currently selling at a forward P/E of 7.9.
Those are the reasons why I’d buy its shares. However, I should note that the fashion industry is incredibly competitive and over the last year we’ve seen some big-name businesses collapse. If customers go elsewhere, that could happen to N Brown as well.
