I’ve been using recent volatility on stock markets as an opportunity to buy beaten-down bargains. More specifically, I’ve been looking for the best cheap shares to buy and hold for the next decade.
And here are two on my radar today.
Frontier Developments
Should you invest £1,000 in Games Workshop right now?
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The video games industry has ballooned in size over the past decade and today it’s worth more than the film and music industries combined.
And thanks to rapid technological improvements — which have given birth to the e-sports craze — it looks poised for further explosive growth during the next 10 years.
That’s why I’ve invested in technical and creative services business Keywords Studios. And it’s why I’m thinking about buying games studio Frontier Developments (LSE: FDEV) shares for my portfolio as well.
Frontier has a number of ultra-popular games franchises under its belt. These include the Jurassic World, F1 Manager and Elite Dangerous titles. And right now they’re in extremely high demand. They powered revenues at the business 26% higher in the 12 months to May to record levels of £114m.
The games industry is hugely competitive. And costly game development problems can be common, so success here isn’t guaranteed. But Frontier’s impressive momentum and the huge investment it’s making in software development are very encouraging. The business raised its headcount by as much as a quarter last year.
I also think the tech company’s low valuation bakes in the threat posed by rival developers. Today, it trades on a price-to-earnings growth (PEG) ratio of just 0.4. A reading below 1 suggests that a stock is undervalued.
Glencore
I think Glencore’s (LSE: GLEN) a great share to buy to exploit the upcoming commodities supercycle.
Some of the raw materials it mines and trades include copper, which is a key component in electric vehicles (EVs) and renewable energy technology, plus nickel and zinc. These materials are used in the manufacture of EV batteries.
It also mines iron ore and ferroalloys, demand for which should soar amid global construction activity, plus aluminium, whose applications include power lines, consumer electronics and skyscrapers.
Glencore’s more recent push into lithium adds extra appeal too. It’s inked deals to become involved in the recycling of lithium-ion batteries. And according to reports it’s looking to begin trading the battery metal to exploit soaring EV demand.
I’m a little concerned about the company’s huge exposure to fossil fuels. For example, 24% of group earnings are generated from coal production. This is a risk as the world transitions from dirtier fuels towards other sources like renewables.
Having said that, I believe the bright demand outlook for Glencore’s other commodities makes up for this.
Today the FTSE 100 firm trades on a forward price-to-earnings (P/E) ratio of 3.8 times. On top of this it boasts a gigantic 10.2% dividend yield. I think it’s a top value stock to buy right now.
