I see cheap shares everywhere at the moment and I think it’s totally understandable why. The global economy is still scarred from the shock of the pandemic and the subsequent supply chain issues.
Persistently high inflation and rising interest rates continue to create uncertainty, as does the spectre of a global recession. Then there’s still no end in sight to the dreadful conflict in Ukraine.
And to make matters worse, we’ve just seen the biggest bank failure since 2008. This has shaken investor confidence in the global financial system itself.
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But I’m confident these serious problems won’t last. At some point, inflation will taper off, as will interest rates, and global economic growth and technological progress will continue.
The stock market will recover ground and march higher over time.
Discounted innovation
I see a handful of long-term opportunities on the FTSE 100 today. The first and most obvious to me is Scottish Mortgage Investment Trust (LSE: SMT).
The trust’s website greets us with the words “The future. Be there first. Invest in progress.” The portfolio is packed with firms that represent a high-tech future. Tesla, Adyen, SpaceX, Stripe, and many more examples.
The problem at the moment is that a lot of investors are interested in the next few weeks rather than the next few years. Investment horizons have shortened considerably. But I don’t think it’ll be like that forever. A new bull market will take shape.
Plus, Scottish Mortgage shares now trade at a 19.9% discount to the actual net asset value (NAV) of the trust. That’s essentially like buying £1 worth of the portfolio for 80p!
Buying shares for less than the NAV means I could potentially turbocharge my returns if and when that discount narrows.
Of course, there’s a risk that the discount persists or even widens further. But that’s a risk I’m willing to take and I’m buying the shares.
More potential bargains
Another stock I like the look of despite ongoing uncertainty within the financials sector is insurer Legal & General. At 229p, it’s trading on a price-to-earnings (P/E) multiple of just 6.4, with a prospective dividend yield of 8.6%.
Next, Glencore shares down 17% since the turn of the year. Again, that leaves this mining stock with a low P/E (4) and a high dividend yield (8%).
I have no idea what will happen with commodities and the share price in the short term. There’s a risk both could decline.
But copper demand should soar in the years ahead as electricity networks need a huge amount of it. And as one of the world’s leading producers and marketers of copper, Glencore is incredibly well positioned to benefit.
I’d buy both stocks today if I didn’t already own them.
FTSE 250
On the FTSE 250, I think pub chain J D Wetherspoon could be a bargain. The stock is down 49% in five years, having taken a massive hit during the pandemic.
Obviously the ongoing cost-of-living crisis likely presents challenges to its customer base. But I think its brand and value proposition give it a durable competitive advantage.
The company could even take market share as people shun pricier restaurants for more affordable pub grub down the high street. So I’ve put Spoons’ shares on my watchlist.
