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.
The post I’m eyeing up these 2 cheap shares before the market recovers! 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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More reading
10.4% and 8.5% yields: which of these dividend stocks is best?
Better high-yield buy: Phoenix Group vs M&G shares?
I’d buy 1,000 more shares in this stock for passive income… before it surges again
Looking beyond buy-to-let: 3 high-yield insurers for passive income
I’d buy 4,300 shares of this FTSE 100 financial stock to aim for £1,000 a month passive income
Sumayya Mansoor has no position in any of the shares mentioned. The Motley Fool UK has recommended M&g Plc. 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.
