The list of cheap shares on my watchlist has far outgrown my budget, leaving me in a tough position to decide what to buy each month.
Two I’ve overlooked for too long are now up by almost 5% this past month. Did I miss the boat or is this just a temporary rise?
Let’s ask the charts.
Aviva
Aviva (LSE:AV.) is one of the UK’s largest multinational insurance companies, dealing in health, savings, investments and pensions. In fact, my very own pension is entrusted to it.
Regarding performance, I haven’t been blown away by Aviva over the past year. The share price spent much of 2023 declining, only to make a weak and staggered recovery towards year-end.
But since February the share price has rocketed 12% and I wasn’t paying enough attention to grab it!
Most of the recent gains came from news earlier this week that Aviva is rejoining the Lloyd’s insurance market. The return results from a £242m acquisition of Probitas and its fully integrated Lloyd’s platform.
The firm also released its full-year 2023 report last week with better-than-expected results. The combined news lit a firecracker under the share price while I was fast asleep!
But what do analysts forecast for the future?
Aviva’s price-to-earnings (P/E) ratio is now at 12.48, up from last year (although lower than in 2022). This suggests the share price is trading at fair value to the industry average, so I probably missed getting in cheap.
Price-to-book (P/B) ratio is another good indicator of value. With Aviva’s P/B ratio now above one, it looks like I missed out on the cheapest entry point. There might be some growth from here but for now, I won’t be buying Aviva shares.
BT Group
I’ve spoken positively about BT Group (LSE:BT.) several times in the past few months but the share price has made me hesitant to buy. It’s been dipping since early December last year. A mild recovery in mid-February renewed my interest until the sale of the iconic BT Tower was announced, leading to further losses.
I should have jumped in then.
Inexperienced investors may think the sale means BT is desperate for capital. If anything, I think it represents its confidence in the transition to a fully digital network. It’s finally shedding the last remnants of a past era.
Truth is, most of the tower’s infrastructure has been offline for over a decade now.
With the share price now in recovery and BT on track to deliver a nationwide network upgrade, I envision positive growth from here.
Yet with a P/E ratio of 5.84, there’s a good chance the BT share price is still selling below fair value.
However, BT has been spending a lot in preparation for the upgrade, so its debt is now at a concerning level. Most recent results put its debt-to-equity (D/E) ratio at 1.83. This figure ideally shouldn’t rise above one.
I will need to keep an eye on BT’s debt going forward, particularly considering the current economic uncertainty. However, with a high dividend yield of 7% and an attractive price, it’s firmly on my list of cheap shares for my next buying round.
The post On the rise! I regret not buying these 2 cheap shares earlier. Am I too late? appeared first on The Motley Fool UK.
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Mark Hartley has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group 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.
