I’m searching for the best UK shares to buy following recent volatility. Here are two (including a brilliant penny stock) Im considering today.
Inflationary strains
Investing in value retailers is an appealing idea to me as the cost of living crisis worsens. News that Aldi and Lidl are the fastest-growing grocers right now illustrates the excellent investing opportunity here.
It’s why I’m considering buying TheWorks.co.uk (LSE: WRKS). Buying these sorts of stocks might prove a lucrative decision for long after 2022 too. The pressure on shoppers’ wallets is tipped by many to remain severe as inflationary pressures persist.
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Take Andy Haldane, for example. The Bank of England’s former chief economist has said high inflation could last for “years rather than months,” suggesting that elevated price rises could last until 2024.
Working it out
The Works sells books, games, toys, and arts & crafts materials. So it could be argued that the firm might suffer as consumers slash spending on non-essential items.
I still believe the sales outlook for the budget retailer remains compelling however. I think it might benefit significantly as people switch over from more expensive retailers. After all, people don’t stop reading, and children still need toys and games when times get tough, right?
I also think The Works’ bid to bolster e-commerce revenues will pay off handsomely now and in the next few years. Between April and October 2021, online sales here jumped 81% on a two-year basis. This was helped by its large investment in products, its platform, and its fulfilment capabilities.
The Works currently trades around 51p per share. This leaves it trading on a forward price-to-earnings (P/E) ratio of 6.6 times, well inside bargain-basement territory of 10 times and below.
Another cheap UK share to buy
I believe buying Premier Foods (LSE: PFD) shares could be a profitable idea too. This is thanks to its packed stable of ultra-popular food brands.
History shows us that spending on food remains broadly resilient when times get tough. We need to keep eating to keep going, right? So this nearly-penny stock should trade more robustly than many other UK shares, the theory goes.
Premier Foods has an advantage in the market too, thanks to its winning product lines such as Mr Kipling cakes, Bisto gravy and Batchelors instant meals. These brands command supreme customer loyalty that means volumes remains strong at all points of the economic cycle.
Great value
I can’t speak about food producers like Premier Foods without mentioning the impact of rising costs on their bottom line. Commodity prices are soaring on core ingredients and could continue if the war in Ukraine continues. For example, the European Investment Bank estimates that Ukraine is sitting on €8bn worth of wheat it can’t export.
However, I think the threat of rising costs to Premier Foods’ profits are reflected in the company’s rock-bottom valuation. At 105p per share, the FTSE 250 stock trades on a forward P/E ratio of just 9.1 times.
