As an investor who loves a bargain, I’m always looking for cheap shares to buy. Although past performance doesn’t guarantee future returns, periods of stock market turbulence have historically been great times to take positions in promising companies, before a new bull market arrives.
With long-term growth opportunities in mind, if I had spare cash, I’d like to invest in these three undervalued stocks.
AJ Bell
FTSE 250 investment platform provider AJ Bell (LSE:AJB) has endured a challenging start to the year. The company’s share price has slumped 10%.
AJ Bell shares aren’t risk-free. The business operates in an increasingly saturated market as new investment platform providers continue to spring up regularly.
This means the company faces a tricky balancing act in boosting marketing expenditure to promote the brand while also protecting profit margins.
But, despite increasing competition, I like what I see in the firm’s recent results. In its Q2 trading update, AJ Bell revealed a 5% quarterly hike in customers to 455,008. In addition, assets under management ballooned to £3.9bn — up 70% over the last year and 15% in the quarter.
Provided the company can maintain or increase its market share, I’m bullish on its long-term prospects. After all, a new bull market would likely go hand-in-hand with increased investor confidence.
In my view, AJ Bell is in pole position to benefit from that dynamic.
Rightmove
The second cheap share I’d like to buy is FTSE 100 online property search portal Rightmove (LSE:RMV). The Rightmove share price has climbed 8% in 2023, but I think there’s room for further growth.
The company dominates the UK’s online real estate search landscape, claiming an estimated 84% market share. It generates most of its income from subscription fees it charges to estate agents.
The FY22 financial results were overwhelmingly positive. Revenue rose 9% to £332.6m, underlying earnings per share increased 9% to 23.8p, and the company lifted its dividend per share from 7.8p to 8.5p. Today, Rightmove yields a handy 1.5%.
A wobbly housing market could spell trouble for the shares. As mortgages become more expensive, any corresponding decline in house prices poses risks to estate agents and Rightmove alike.
However, Britain’s chronic housing shortage means the long-term demand picture looks robust, which could mean any pain is short-lived. Plus, Rightmove’s significant role in the rental market should help to offset any slump in house sales.
TSMC
Looking beyond the UK’s shores, the Taiwan Semiconductor Manufacturing Company (NYSE:TSM) share price has boomed in recent years. Yet, this could be just the beginning of a glorious growth story.
The semiconductor industry is tipped to nearly double into a trillion-dollar sector by 2030, according to management consulting firm McKinsey. At a price-to-earnings (P/E) ratio of 13.2, TSMC trades at an attractive multiple compared to many competitors.
Granted, the company faces notable geopolitical risks. China’s territorial ambitions regarding Taiwan are in the spotlight. Warren Buffett’s Berkshire Hathaway recently reduced its stake in the company as concerns about a potential invasion rise.
However, conflict isn’t a foregone conclusion. What’s more, the chip-maker is diversifying its geographic operations by ploughing €10bn into a new fabrication plant in Germany. Overall, the risk/reward profile looks attractive and I can see significant upside potential.
