Thinking a UK share’s cheapness is related to its investment quality is a mistake that many novice investors make. The saying “mighty oaks from little acorns grow” applies to investing just as it does to other aspects of our lives. Those who sniff out low-cost stocks have a chance to make a fortune with the right strategy.
Take Ashtead Group investors, for example. Those who bought the rental equipment company’s shares for around 230p a decade ago would have made a colossal profit in that time. The business now trades on the FTSE 100 for around £60.60 a share.
I think the following cheap UK shares could also soar in value over the next 10 years. Here’s why I’d buy them for my own stocks portfolio.
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Glencore (trades at 388p)
Glencore’s another FTSE 100 share I’m thinking of adding to my shares portfolio alongside Ashtead. This is even though rapid economic cooling in China is causing me some nervousness. I think profits here could potentially rocket as demand for electric vehicles and investment in renewable energy technology both grow. Goldman Sachs analysts think copper could average $15,000 a tonne in 2025. That compares with $9,680 today.
The copper that Glencore produces is critical in the construction of these new-age technologies. So is the lead, zinc, nickel, cobalt and other metals and minerals it hauls from the ground. It’s my belief that these opportunities offset the possibility that its coal and oil businesses could suffer as concerns over the climate crisis increase.
Assura (trades at 69p)
I think Assura Group could be one of the best safe-haven stocks to buy for the next decade. Even if broader economic conditions are weak, it can expect demand for its services to remain robust. This property business develops, acquires and rents out primary healthcare facilities in the UK, essential facilities that tie occupiers down to long leases.
Supply of medical properties like these is relatively restricted, supporting strong rents at Assura and its peers. I think the long-term outlook for this sector is rock-solid as Britain’s population steadily ages and the need for healthcare services subsequently rises. I’d buy this penny stock even though a shortage of attractive acquisition opportunities could hit profits growth.
Direct Line Insurance Group (trades at 284p)
Direct Line Insurance Group has a long track record of paying above-average dividends. And for 2022, this cheap UK share boasts a brilliant 8.2% dividend yield. Its exceptional cash generation and the immense pulling power of its brands such as Direct Line, Churchill and Green Flag gives it the firepower to shell out such massive rewards. The FTSE 250 firm’s ultra-defensive operations also give it the confidence to pay big dividends, even when broader economic conditions worsen.
Its true that Direct Line Insurance Group operates in an ultra-competitive industry that threatens profits. It also faces rising claims costs as the climate change emergency worsens. But it’s my opinion that the potential rewards on offer make up for these risks.
