Two cheap shares I’m looking to buy when I next have some spare cash are Phoenix Holdings (LSE: PHNX) and M&G (LSE: MNG). Here’s why I’ll look to snap them up ahead of any market recovery.
Insurance and asset management
Phoenix shares have fallen in recent months, like many other financial services stocks. They’re down 18% over a 12-month period. The shares currently trade for 481p, whereas a year ago they were trading for 593p.
Phoenix’s valuation, on a price-to-earnings ratio of six, makes the shares look dirt-cheap in my eyes. Plus, a passive income opportunity with a dividend yield of over 10% looks well covered by 1.5 times earnings. However, I do understand dividends are never guaranteed.
Continued macroeconomic volatility could hurt Phoenix. The cost-of-living crisis could dent performance and potential returns. This is especially the case as consumers may spend less on non-essential insurance as well as investments planning for later on in life. I’ll keep an eye on performance linked to this.
As I’m a long-term investor, I’m not too concerned about shorter-term problems and view them as temporary blips. Phoenix possesses an enviable reputation, strong brand power, and a wide footprint and presence. In theory, these bullish aspects could help performance and returns to grow.
In addition to this, Phoenix is well-positioned to benefit from the ageing UK population. I know I’m constantly thinking about my retirement. I’m trying to ensure I’m set up to enjoy my golden years without financial worries.
Saving for retirement
What stands out to me regarding M&G is its level of experience navigating issues and downturns. The business has been around for nearly a 100 years, so knows a thing or two about pandemics, crashes, and how to successfully ride the waves of economic uncertainty.
M&G shares are actually up 6% over a 12-month period. They were trading for 191p at this time last year. As I write, the shares are trading for 204p. However, reviewing recent share price performance, volatility has prevented the shares rising.
This is good news as M&G’s valuation is still enticing. A price-to-earnings ratio of 10 is not as low as Phoenix. However, it is still lower than the FTSE 100 average of 14.
The similarities between my two picks continue as M&G shares would also boost my passive income. A dividend yield of 9.5% is also much higher than the FTSE 100 average of 3.9%
Again – like Phoenix – M&G shares could take off once macroeconomic volatility cools and consumers can worry less about food and energy prices. They can then turn their attention to saving and investing once more as well as daily expenses.
Current volatility could dent performance and even impact potential returns in the shorter term. However, my long-term view on investing means I’m prepared for turbulence. M&G also possesses a wide footprint and a good market presence, which should help performance increase in the longer term.
