Like many investors, I feel happy when I find cheap shares to buy for my portfolio. That is not just about their share price, though. I also try to invest in businesses that I think have strong commercial prospects and could do well in future.
Here are a couple of shares I think are attractively valued and that I would consider adding to my portfolio in the coming month.
Legal & General
Insurance is a fact of life for millions of people. Whether it is vehicle insurance or a home policy, people typically make sure that they always have an insurance policy in force. That means that the revenue outlook for the industry is robust.
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Of course, customers could shop around between different providers looking for the right cover for them. That is one of the reasons I am attracted to Legal & General (LSE: LGEN). Its familiar name, long history, and iconic umbrella logo are familiar to millions of people. That can help the company keep its customer acquisition costs under control but still attract new clients.
There is more that I like about the business. Its price-to-earnings ratio of less than eight looks like good value to me. On top of that, the company offers a dividend yield of 7%. That could make it an attractive passive income choice for my portfolio.
One concern I have is if new insurance pricing rules introduced this year lead to lower profit margins. Then again, they could turn out to be a boon for companies with strong brands, like Legal & General, if customers worry less about pricing policies and focus more on a company’s reputation.
Unilever
A second company I would consider buying in May is consumer goods giant Unilever (LSE: ULVR).
The P/E ratio here is a much higher 19. So, although the 3.8% dividend yield is attractive, why do I rate the firm among cheap shares to buy now for my portfolio?
The answer lies in its asset base of iconic brands from Knorr to Surf. Does a total market capitalisation of £90bn adequately value the potential profit-making ability of this collection of iconic names in future? I am not sure it does.
Cheap shares to buy now
Last year, the company made post-tax profits in excess of £5.5bn. Its huge customer base means Unilever products are used 2bn times a day or more somewhere around the globe. Admittedly, rising costs could hurt profit margins. But I see that as a short-term issue. As an investor I focus on the long term. I think Unilever’s iconic brands could allow it to continue charging premium prices and making large profits far into the future.
That is why I think it is among cheap shares to buy in May for my portfolio.
