There’s no shortage of ‘cheap shares’ right now — at least on face value. The market has been well and truly spooked by Liz Truss and her short stay in office. The FTSE 100 and FTSE 250 had a torrid time during the short tenure.
The market is likely to improve on Rishi Sunak’s accession to PM. After all, he seems much more fiscally responsible, and that’s what the market wants to see.
But with both indexes down considerably, I’m looking for cheap stocks to add to my portfolio before November starts.
Hargreaves Lansdown
Hargreaves Lansdown (LSE:HL) shares have been on a downward track over the past 12 months. In fact, they’re down 52%. The investment supermarket saw its share price soar during the pandemic as Britons increasingly turned to investing. After all, there wasn’t much else to do.
However, as was arguably predictable, Hargreaves wasn’t able to continue growing at such a rate following the pandemic. But considering the current economic environment — with a cost-of-living crisis — I don’t think the firm is performing too poorly.
A trading update on 17 October highlighted the firm brought in net new business of £700m in the quarter to 30 September, with assets under administration reaching £122.7bn.
In the long run, I think there are several reasons to be positive about this stock. As many as 1 in 10 people started investing during the pandemic and more and more investors look to take charge of their own investments. As the UK’s largest investment platform, with 1.7 million users, Hargreaves stands to benefit.
I already own Hargreaves shares, but with the share price near its lowest in 10 years, and a 5.7% dividend yield, I’d buy more.
Barclays
Barclays (LSE:BARC) is an unloved British banking share. It’s a giant of the banking world, but it’s largely seen as unexciting. And 2022 hasn’t exactly gone to plan. While other banks performed well on higher interest rates, in July, Barclays reported a fall in pre-tax profits. This was due to a £1.9bn charge to cover the cost of buying back securities it sold in error.
The stock is currently down 26% over the course of the year. But there are some very positive fundamentals. Barclays has already put aside £300m for bad debts induced by inflation, but higher interest rates are pushing up margins.
Banks have already seen margins increase, but with Bank of England interest rates set to near 6% next year, net interest margins (NIMs) will soar. Recessions certainly aren’t good for credit quality, but higher NIMs should more than make up for it.
Moreover, the bank earns around a third of its revenue from the US. And with the pound weak, dollar-dominated income will be inflated when converted into GBP. Once again, I already own Barclays shares, and despite a poor year so far, I’d buy more shares while it trades at around 150p.
There’s also the matter of a 4% dividend yield. It’s not groundbreaking, but it’s certainly good to have.
