I’ve been screening for shares to buy as I reposition my portfolio for 2022. These two stocks have attractive prospects, and both are dirt-cheap, in my view.
Leading retailer
The Halfords (LSE: HFD) share price has had a decent start to the new year. It’s up around 3% as I write. Over one year, the stock is up near 19%. But I think the shares can continue to rise through 2022.
Halfords is a recognisable brand as it’s a leading automotive and cycling retailer throughout the UK. It also offers servicing and repair in its auto centres. The company announced a shift in strategy in 2018, which was to evolve into a services-focused business. Progress towards this has been encouraging, with the Group Services division now representing 33% of total revenue.
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Within the services offering, Halfords has been expanding its electric vehicle capabilities. For example, the company has already trained 1,300 electric technicians. This is on track to reach 2,000 by the end of fiscal year 2022 (the 12 weeks to 31 March 2022). This should provide excellent growth potential in the years ahead. As it stands, revenue generated from servicing electric cars grew 120% year-on-year in the recent interim results.
The stock is very cheap in my view. On a price-to-earnings (P/E) basis, the shares are valued on a multiple of 11. I think this represents very good value relative to the potential for growth in the years ahead.
There are risks to consider before I buy the shares. For one, Halfords has been impacted by the supply chain disruption of late. I’d also consider the potential for competitors in the electric vehicle services market, too. Nevertheless, I’d buy Halfords shares today.
Another good prospect
The next company is finnCap (LSE: FCAP), a financial services company specialising in corporate finance, and mergers and acquisitions (M&A). It’s much smaller than Halfords, with only a £60m market cap as I write today. The share price has rocketed 53% over one year though, as the M&A and initial public offering (IPO) markets have been extremely active.
The recent interim results showed revenue increasing by 55%, which was a record performance for the company. The deal pipeline for IPOs and M&A transactions was said to be remaining strong too.
This is all great. But if I buy the shares today, I’d be earning a cut of future profits. So, the bigger question is, can the record performance continue?
I think the prospects look good. According to a survey conducted by Ansarada, M&A deals in the UK are expected to rise in 2022. The IPO market has also recently been given a boost by the Financial Conduct Authority, the UK’s financial regulator. The rule changes should encourage businesses to list in the UK at an earlier stage. This is a prime target market for finnCap, and should boost future IPO activity.
The shares are only trading on a forward P/E ratio of 8 as I write today. I view this as a dirt-cheap valuation for the potential growth ahead.
The biggest risk for finnCap as I see it is a stock market crash, possibly due to a new strain of Covid. This is highly likely to reduce corporate financing activity. But on balance, I would buy finnCap shares today.
