2 dirt-cheap UK shares to buy

This Fool would buy both of these dirt-cheap UK shares, based on their valuations and growth potential over the next few years.

| 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.

As the economy continues to recover from the pandemic, I’ve been looking for UK shares to buy for my portfolio. I’ve been focusing on dirt-cheap shares, as I think these will benefit from the double tailwind of both growth and improved market sentiment.

And as market sentiment improves, I believe investors may reevaluate their prospects and send valuations higher. With that in mind, here are two dirt-cheap UK shares I’d buy today. 

UK shares to buy

The first company on my list is the specialist property real estate investment trust (REIT) Capital & Regional (LSE: CAL). This organisation owns shopping centres around the UK. 

The pandemic has decimated this sector, and Capital hasn’t been able to escape the pain. For its 2020 financial year, the company reported a loss of £200m, nearly 2.5 times its current market capitalisation. 

Property writedowns, as well as lower levels of rent collection, have all hurt the group. However, things are starting to look up. Occupancy across the company’s portfolio was nearly 90% at the end of May.

Moreover, 99% of leased units were open and trading across the group’s seven shopping centres towards the end of June. On top of this, the firm has agreed 38 new lettings and renewals this year. 

These are all positive developments. Still, this business isn’t out of the woods yet. There’s been a structural shift over the past 24 months away from brick-and-mortar stores towards online retail. This is likely to have a lasting impact on the group’s property portfolio. Revenues may never recover to pre-pandemic levels. 

Nevertheless, right now, the stock is selling at a price-to-book (P/B) value of around 0.5. I think this looks dirt-cheap. So, while the stock might have its risks, I’d buy the firm as part of my basket of UK shares. 

Stormy waters

Another company I’d buy for my portfolio of dirt-cheap UK shares is John Wood (LSE: WG). This oil and gas services business has been battered by volatile oil prices recently. Its subsidiary, Amec Foster Wheeler Energy Limited, has also had to deal with an investigation from the UK Serious Fraud Office. This investigation recently ended with a £103m deferred prosecution agreement. 

With the investigation out of the way, and the outlook for the oil and gas industry looking up, John Wood can now focus on growth. 

And as the group moves on, investors can snap up the share for a bargain price. The stock is selling at a P/B value of 0.5 and a forward price-to-earnings (P/E) multiple of 10.2. 

I’d buy the stock for my portfolio of UK shares based on these metrics. However, I should reiterate that this firm’s outlook is tied to that of the oil and gas sector. This sector can be highly cyclical, and so can John Wood’s earnings. As such, the company’s growth is far from guaranteed. 

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.

Rupert Hargreaves has no position in any of the shares mentioned. 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

Investing For Beginners

Up 31% in a month, could this FTSE 250 stock be getting bought out?

Jon Smith takes a look at speculation that's pushing the share price of a FTSE 250 share higher and considers…

Read more »

Investing Articles

Here’s how I’d follow Warren Buffett to start building passive income in 2025

Ben McPoland highlights one FTSE 250 firm with a strong competitive edge that he thinks can continue rewarding investors with…

Read more »

Investing Articles

Burberry shares: undervalued FTSE gems that are ready to rocket?

Burberry shares soared at the beginning of the week as the takeover rumour mill went into overdrive. Is Paul Summers…

Read more »

US Stock

Here are the latest share price forecasts for S&P 500 giant Amazon

Amazon has generated monster gains for investors over the last decade. And Wall Street analysts believe the S&P 500 stock…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

2 high-yield FTSE 250 shares I’d buy today — and 1 that I’d avoid

UK markets have felt some volatility after last week’s Budget and the FTSE 250 was no stranger to it. Our…

Read more »

Investing Articles

3 reasons the Rolls-Royce share price could soar over the next decade

Sustainable aviation fuel, narrow-body aircraft, and small nuclear reactors could all keep the Rolls-Royce share price climbing over the next…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

Here’s how much income I’d get if I invested my entire £20k ISA in cheap BT shares

BT shares are on the up but still cheap, while the FTSE 100 telecoms stock offers a good yield too.…

Read more »

Investing Articles

2 FTSE dividend shares yielding more than 6% with P/Es of less than 9!

Harvey Jones picks out two brilliant FTSE 100 dividend shares that yield more than 6% but are selling at strangely…

Read more »