Is there a stock market recovery on the cards for 2023? Well, I think this year could turn out to be a great time to buy. And I see some cheap shares out there that I think might not stay cheap for long.
Cheap airline
One of them is easyJet (LSE: EZJ). The airline share price has been on the up since late 2022. But it’s still down by close to 70% in the past five years.
UBS rates the stock a buy now, and Barclays does too.
Forecasts for the next few years make things look good. After three years of losses, the City has a profit marked down for 2023.
It would mean a price-to-earnings (P/E) ratio of 15. And more growth in the next couple of years would drop that to less than nine by 2025. I think that could be a steal.
There might even be a big return to dividends too. It won’t be much this year, but there’s a 5% yield on the cards for 2025.
Airlines have their own risks, mainly due to price competition and costs, like fuel, that are out of their control. But I like the look of easyJet now.
Bargain bank
I can’t think about cheap shares and miss out Barclays (LSE: BARC).
The stock took a hit when a couple of badly-run US banks faced a crisis earlier in the year. But I saw no need for it, as liquidity at Barclays looks very solid.
I see all the UK banks as good buys now. But the Barclays valuation makes it stand out to me. Even after the shares have come back from their 2023 lows, the forecast P/E is still under five.
I do think banks should be on low ratings. After all, they suffer when the economy is weak. And it sure is weak right now.
But down at that level, I think Barclays just looks too cheap. It’s one of my top candidates for my next ISA buy.
High street
I’ve thought of Marks and Spencer (LSE: MKS) as a sell for just about as long as I can remember. And the long-term share price chart makes me think I got it right.
But I’ve had a new look at it, and these days I like what I see.
The high street chain saw a loss in 2021, which is no shock. But it bounced back to profit in 2022, and forecasts show solid earnings for the next two years.
We’re looking at a P/E of 11 to 12 for 2023 and 2024, falling to 9.5 by 2025. That’s some way ahead, so we need to take care there.
But what buoys me more is a return to dividend growth. The City expects a rising yield to reach more than 4% by 2024. And it would be more than twice covered by earnings.
I need to dig some more into M&S, and retail stocks are not out of the woods yet. But right now, I think it looks cheap.
