I’ve been perusing the FTSE 100 and FTSE 250 in the last few days and what I’ve noticed is the large number of cheap shares available right now.
There are plenty of ways to build wealth. But my plan is to buy undervalued shares and hold them for the years and decades ahead. This is an investment strategy similar to Warren Buffett’s. It’s safe to say, it seems to have worked for him.
We’ve been through large bouts of volatility in recent times. The pandemic saw markets come tumbling down. What’s followed, from inflation to soaring energy prices, has also seen many shares take a massive hit.
However, I like to remain optimistic. The current economic environment is challenging. But with that comes opportunities.
Playing the long game
The last 12 months have seen the Footsie rise a meagre 2%. In 2023, it’s up less than 1%. Nevertheless, my plan is to have my money tied up in the stock market for as long as possible.
With the UK base rate sitting at 5.25%, there are some attractive returns on savings accounts available at the moment. However, I’d be missing out on growth opportunities. Since its inception in 1984, the Footsie has returned around 7% on average every year. That certainly beats me leaving my cash in the bank.
I’m investing for the long run. The stock market has proven over and over again that playing the long game is the smartest way to reap its rewards. I could try and time the market or use methods such as day trading. But this isn’t sustainable.
What to buy
With that, I have my eye on one stock that I’d buy today and hold for years to come.
I like the look of HSBC (LSE: HSBA). In the last 12 months, the stock has risen an impressive 24%. Yet with a price-to-earnings ratio of just 5.6, I think it looks undervalued. To add to that, it has a dividend yield of 5.4%.
What makes me a fan of HSBC is its international exposure. Its presence covers 62 countries. What’s more, it has a large focus on Asia.
The region accounts for around half of its revenues. And the Asian commercial banking sector is expected to grow impressively in the next five to 10 years. As such, HSBC is placing greater focus on these high-growth regions. It’s set aside $6bn of investment in China, Hong Kong, and Singapore to 2025 as it vies to achieve double-digit profit growth.
While I like the exposure HSBC’s Asian exposure, there are risks. China’s property market has endured a slump in recent times, which the firm has over $13bn invested in. This has led to multiple writedowns for the bank in recent quarters. This may continue in the near term.
However, long term, I think HSBC’s focus on the region will prove to be fruitful. With a cheap valuation, its companies like HSBC that I’m looking to buy and keep in my portfolio for the times ahead.
The post I’m planning to snap up cheap shares and hold them for decades appeared first on The Motley Fool UK.
Pound coins for sale — 51 pence?
This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!
Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.
What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?
See the full investment case
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HSBC Holdings is an advertising partner of The Ascent, a Motley Fool company. Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has recommended HSBC Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
