2 dirt-cheap UK stocks under £3 to buy right now

I don’t think investors like me need to spend a fortune to build a great shares portfolio. Here are two cheap UK shares I think could be top buys for me today.

| 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.

British bank notes and coins

Image source: Getty Images

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.

I’m searching for the best dirt-cheap UK stocks to add to my investment portfolio. Here are two that have attracted my attention recently.

In great shape

Intense competition in the fitness industry could pose a significant threat to The Gym Group (LSE: GYM). But I think the rate at which the entire sector is predicted to grow might offset this problem and still help this cheap UK share to deliver mighty profits growth. Analysts at Technavio think the global gym and health club market will grow by more than $100bn between now and 2025.

I’m particularly encouraged by The Gym Group’s focus on the cheaper end of the market. This is enabling it to exploit the rising importance of value in the mind of consumers. It might also serve the company well if the cost of living keeps on rising.

Should you invest £1,000 in The Gym Group Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if The Gym Group Plc made the list?

See the 6 stocks

Membership numbers at The Gym Group have rocketed since Covid-19 restrictions were eased in the spring. It had 730,000 members on its books as of June, up from 547,000 four months earlier.

The company also has plans to open 40 new gyms between the middle of 2021 and the end of next year, to capitalise on its momentum. And it embarked on a £30.3m equity raise in July to help it execute its programme.

City brokers expect GYM to break back into profit in 2022 following two years of coronavirus-related turbulence. But be aware that, at its current price of 275p per share, current projections leave the company trading on an elevated P/E ratio of 69 times for next year.

This sort of pumped up valuation could prompt a share price crash if trading conditions suddenly worsen again. Say, for example, if the pandemic worsens considerably and gyms have to be closed down once more.

Another cheap UK share on my radar

As a long-term investor however, I’m prepared to look past these immediate threats and consider the returns The Gym Group could provide me over a number of years. It’s why I’m also thinking about buying Premier Foods (LSE: PFD) for my shares portfolio today.

I reckon this dirt-cheap UK share is an attractive buy for several reasons. Firstly, it operates in the highly-defensive food production market. Therefore it can expect sales to remain stable, even if broader economic conditions, and consequently broader consumer spending power, sink.

Secondly, it owns a broad array of beloved food brands, from Mr Kipling cakes and Paxo stuffing to Sharwood’s Indian cooking sauces. These labels have exceptional pricing power that allow Premier Foods to raise prices at all points in the economic cycle.

And finally, at 109p per share, the company trades on a bargain-basement forward P/E ratio of 9.5 times. I think this could be one of the best cheap UK shares to buy today, despite the danger posed by rising input costs in the short-to-medium term.

But there are other promising opportunities in the stock market right now. In fact, here are:

5 stocks for trying to build wealth after 50

The cost of living crisis shows no signs of slowing… the conflict in the Middle East and Ukraine shows no sign of resolution, while the global economy could be teetering on the brink of recession.

Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.

Claim your free copy now

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.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended The Gym Group. 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

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

Here’s the Tesco share price forecast for the next 12 months!

Tesco's valuation has dropped to multi-year lows after recent share price weakness. Is now the time to consider buying the…

Read more »

Illustration of flames over a black background
Investing Articles

Just released: March’s higher-risk, high-reward stock recommendation [PREMIUM PICKS]

Fire ideas will tend to be more adventurous and are designed for investors who can stomach a bit more volatility.

Read more »

Investing Articles

I asked ChatGPT for the best FTSE 100 investment trust to buy… here’s what it said

There aren't many FTSE 100-listed investment trusts and according to ChatGPT there’s only one winner. Dr James Fox explores.

Read more »

Investing Articles

How much should investors put in an ISA to achieve the average UK wage in passive income?

Millions of Britons use the Stocks and Shares ISA as a vehicle to build wealth, but a successful investor can…

Read more »

Investing Articles

2 cheap FTSE dividend stocks to consider buying for an ISA

The deadline for using up the Stocks and Shares ISA allowance is almost upon us. Paul Summers has spotted two…

Read more »

Investing Articles

£20k in a Stocks and Shares ISA? Here’s how an investor could target £1,342 in passive income each month

Christopher Ruane explains how a long-term approach to investing a Stocks and Shares ISA could generate a four-figure monthly income.

Read more »

Shot of an young Indian businesswoman sitting alone in the office at night and using a digital tablet
Investing Articles

Millions are missing out on ISA account benefits! Here’s what I’m doing now

Swathes of people are missing the chance to supercharge their returns with a Stocks and Shares or Lifetime ISA account.…

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Investing Articles

Here’s my plan to survive and thrive in a stock market correction

A falling stock market can be an opportunity, but investors need a plan. Stephen Wright shares his strategy for taking…

Read more »