A large number of UK shares slumped in value last month. The FTSE 100 slumped to two-month lows during the September sell-off before recovering ground towards the end of the month. It fell half a percentage point over the course of September. Meanwhile the FTSE 250 slumped 4% as fears over the British economy steadily ballooned.
Concerns over the macroeconomic landscape haven’t dented my investing appetite, however. Here are three of the best cheap UK stocks I’d buy this October. I think recent price drops make these quality shares — which all trade on price-to-earnings growth (or PEG) ratios below 1 — too cheap to miss.
Primed for expansion
I was surprised to see the Begbies Traynor share price slump 4% in September. I think this is one of the best stocks to buy when economic conditions worsen. Why? It supplies rescue and recovery services to businesses and provides insolvency options to people and companies.
The current favourable climate means City analysts think Begbies Traynors’ earnings will rise 28% this fiscal year (to April 2022). This leaves it trading on a forward PEG ratio of 0.5. A reminder that a reading below 1 suggests a stock could be undervalued by the market. Naturally, business activity at Begbies Traynor might fall during a strong economic recovery over the longer term. But I’m still excited about the company’s outlook for the years ahead as it rapidly expands.
All systems go
I think TI Fluid Systems (LSE: TIFS) is also one of the best cheap stocks to buy this October. And I say this as an owner of this particular UK share myself. Analysts expect annual earnings here to rocket almost 600% in 2021 on resurgent car production following Covid-19. This creates a PEG ratio barely above zero.
It’s true that TI Fluid Systems’ profits column could suffer if supply chain issues continue to hit the auto industry. But I bought this UK share — which manufactures car parts that store, carry and deliver fluids — to play the electric vehicle revolution over the coming decade. These sort of low-carbon autos require substantially higher loadings of such parts than cars powered by traditional combustion engines. And sales of hybrid and pure electric vehicles are tipped to overtake demand for gas guzzling cars by the middle of the decade.
One of the best e-commerce stocks to buy
I also think the Royal Mail share price provides a great dip buying opportunity for my portfolio. City estimates point to a 16% earnings leap here in the current fiscal year to March 2022. This leaves the business trading on a forward PEG ratio of just 0.4. Oh, and a 4.8% dividend yield rounds off my view that Royal Mail’s one of the best cheap stocks to buy.
Sure, earnings at the courier might struggle as the UK economic recovery cools. But from a long-term perspective I think its bottom line could soar as e-commerce growth clicks through the gears (eMarketer thinks online will account for 38.6% of all retail sales in Britain by 2025). Besides, its fast-growing overseas GLS division should help it offset any trading weakness at home.
