I like a bargain as much as the next investor. The flagship FTSE 100 of leading British shares has recently been riding high. But there are still bargains to be found, both in the FTSE 100 and the wider market. I have been looking for cheap shares to buy – and think I found some!
Here are three I recently bought.
Victrex
I am a longstanding shareholder in polymer manufacturer Victrex (LSE: VCT) – and sometimes that does not seem to be a wise choice.
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On paper, the rather dull industrial sounds like a potentially great investment.
It makes polymers for use in safety-critical function in cars, planes, and the like. That gives it pricing power. It has a number of proprietary products, which makes it sound like Victrex has a license to print money.
In practice, though, the share has halved in price over the past five years.
There is a risk from growing competition. The key and high-margin medical segment is still underperforming when it comes to demand, and input cost inflation has made the business more challenging than it once was.
Still, the 6% yield is attractive. While the current valuation looks high relative to earnings, the past several years have seen earnings well below what I believe Victrex is capable of over the long run. As a long-term investor, I see its current price as a bargain.
Greggs
While Victrex may be rather obscure, the same cannot be said of ubiquitous bakery chain Greggs (LSE: GRG).
It has taken a simple, proven retail formula and tweaked the business model to its own advantage.
Unique product lines help build customer loyalty and give Greggs pricing power. A vast estate of branches offers economies of scale, allowing the chain to part-produce some products at centralised factories before shipping them out to shops for onsite finishing.
Consumer confidence is weak, potentially hurting sales. Profits are also threatened, by the additional wage and payroll costs imposed by last autumn’s Budget.
But last week’s share price fall following results publication looked overdone to me.
Greggs was on my list of shares to buy for a long time – so I made a move when it fell to what I saw as an attractive price.
Associated British Foods
If I asked you to name a fancy tea brand, there is a fair chance you would say Twinings. If I asked you to name a high street retailer specialising in cheap clothes, there is a fair chance you would say Primark.
And so on – we could work through the list of well-known brand assets owned by Associated British Foods (LSE: ABF) in such a way for quite a while.
Such a portfolio helps the FTSE 100 firm make solid profits.
But concerns about competition to Primark, weak commodity costs, and uneven demand in the agriculture business have helped push ABF shares down to a point where it now sells for under 10 times earnings.
Like Greggs, this business had long been on my list of shares to buy if the price was right.
The current price looks attractive to me, which is why I recently purchased some ABF shares for my portfolio.
