Best Cheap Stocks in the UK to Watch
The term ‘cheap stocks’ is somewhat broad, but typically refers to shares that are undervalued. This might be because at current prices, the stocks are worth less than their perceived value. People seek out cheap stocks both because they’re an affordable way to add to your portfolio and because they can represent big growth opportunities.
In this guide, we discuss some cheap stocks UK to consider in 2022. We also show you how to find a basket of cheap stocks yourself and how to buy your chosen shares from a commission-free broker.
List of Popular Cheap Stocks 2022
Don’t have time to read through our analysis in full? Scroll down to read our findings on each cheap stock.
- Lockheed Martin
- Ford Motors
- Sage Group
- Vodafone Group
Cheap Stocks UK Reviewed
After all, some stocks- namely those from within the tech sector (NASDAQ), saw double-digit losses in the space of 1-month, only to then see their share prices go on a prolonged upward trajectory.
For those unaware, the company is behind the payment technology found across thousands of UK retail locations. Think along the lines of supermarkets, convenience shops, petrol stations, and malls.
Naturally, Paypoint makes its money when merchants use its technology to process payments. It goes without saying that the extended lockdown phase in the UK has been disastrous for Paypoint. After all, with most of its retail locations still shut for business, revenues have taken a major hit.
In turn, this has a direct impact on its stock price. So, towards the end of February 2020, Paypoint stocks were flying high at 965p per share. Just a few weeks later, the very same stocks were priced at just 389p. That’s a capitulation of almost 60%.
There has been a slight recovery since, with the shares priced at 580p as of February 2021. However, Paypoint stocks still have a long way to get back to pre-pandemic levels.
Like all of the cheap UK stocks discussed on this page, you can buy shares in Paypoint.
We actually discussed EasyJet in our recent article on the airline stocks to buy. Sure, the wider airline industry is currently in dire straights – with no sure-fire way of knowing when global passenger numbers will return to pre-pandemic levels.
But, what we can be certain of is that this is a matter of when, as opposed to if. This is especially the case when you consider the number of COVID-19 vaccines currently in circulation.
Before the pandemic came to fruition, this budget airline was actually enjoying a period of success on the London Stock Exchange. For example, the stocks went from 887p to 1,500p between August 2019 and February 2020.
Like the rest of the airline industry – EasyJet shares took a parabolic turn for the worst in March 2020 – with the shares hitting 52-week lows of just 410p.
Since then, EasyJet stocks have recovered, as at a February 2021 price of just under 900p. On the one hand, that’s a recovery of over 120% in just under 12 months – which is certainly favourable for those that bought the stocks during the drip.
ITV is the second-largest broadcasting company in the UK behind the BBC and generates most of its revenue from advertising. Broadcasting companies seem to have been left behind in the wake of streaming services such as Netflix and Amazon Prime – yet ITV’s recent earnings report says different.
According to their trading update, total external revenue was up 28% to $2.28bn in the nine months to September 30th 2021, with total advertising revenue also up by 30%. ITV’s executives noted in the trading update that they expect 2021 to be the year in the company’s history in terms of advertising, with all metrics improving on 2020’s and 2019’s figures.
Online viewing has also increased by 39% – although total viewing was down by 5% compared to last year. Again, the context here is that 2020’s figures were driven by many people being stuck at home, which led to more time in front of the TV.
In a similar nature to the airline arena, oil shares took a major beating in the midst of the pandemic last year. This was because the demand for oil in Q2 2020 was virtually non-existent. In turn, this resulted in the price of oil hitting lows of just under $20 per barrel.
Naturally, the outcome of this was major oil stocks like BP seeing huge share price losses.
In terms of the stocks, BP went from 580p to 188p in March 2020 – a decline of over 60% in a matter of weeks.
Recovery has been somewhat modest, with BP stocks trading at over 270p at the time of writing – an increase of 43% from 12 months prior.
5. Lockheed Martin
If you’re unfamiliar with Lockheed Martin, this company is involved in aerospace defense, security, and arms. The stocks are listed on the NYSE with a huge market valuation of almost $100 billion at the time of writing.
Fast forward five years and the stocks are worth over $340 – representing a growth rate of 56%.
Firstly, Lockheed Martin is a dividend payer, with the US-based firm currently offering a trialing yield of just over 3%. Lockheed Martin has increased the size of its annual dividend for 20 consecutive years.
6. Ford Motors
The vast bulk of -100 US stocks are priced in the hundreds of pounds each.
The stocks – which are listed on the NYSE, are trading at just over $11 each as of February 2021. Ford Motors has actually had a good 12-months, which is somewhat surprising when you consider the impact that COVID-19 has had on the wider automobile industry.
This is especially the case when you consider how much interest there is in electric vehicle makers like Tesla.
7. Sage Group
Sage Group (mainly referred to as Sage) is the UK’s second-largest technology company and offers accounting and salary-management software to business clients across the country. Much of Sage’s operations are now based in cloud computing, with intense competition from the likes of Amazon Web Services (AWS).
Firstly, Sage uses a subscription-based model with high customer retention – meaning that the company continues to have a consistent income level every month. Recurring revenue increased by 5% between January and September 2021, with a 7% increase in recurring revenue from the US. This highlights Sage’s expansion plans, as the company has typically dealt with British and European clients.
8. Vodafone Group
Vodafone shares are currently trading at just over 130p each.
But, unlike Just Group, Vodafone is a highly established company with a huge market cap of over £35 billion. Over the past few years, Vodafone shares have been moving in somewhat of a flat, sideways direction. Much is this is due to fierce competition from low-cost telecommunication providers.
Furthermore, and perhaps most pertinently, Vodafone is expected to play a major role in the future of 5g technology.
Not only does this include the UK, but several European locations, too. Plus, Vodafone has a much wider reach than just the UK/EU, so the potentialities that 5g can bring to its bottom line are huge.
Goodyear is an industry leader in the global tire manufacturing space. Launched way back in 1898, this stock first went public in 1926 – so it’s a hugely established long-term holding.
With the deal worth $2.8 billion the shares surged over 24% in just one day of trading after the announcement.
At the forefront of this is the fact the Verizon currently trading at just under 13 times its earnings. This is especially the case when you consider that Verizon is yielding a dividend of about 4.5%.
Features of Cheap Stocks
Although we have already discussed 10 cheap stocks, it’s important that you do your own research. More specifically, you need to find your own cheap stocks as opposed to relying exclusively on third-party commentators.
With this in mind, below we explore how you can find cheap stocks to buy now UK on a do-it-yourself basis.
For those unaware, this is a ratio that attempts to explore whether a stock is undervalued or overvalued – based on a couple of key metrics. The ratio will look at the relationship between the stock’s current share price with the earnings per share (EPS) from the prior calendar year.
- Let’s say that the share price of the company is 1,000p
- The EPS is 200p
- This means that the company has a P/E ratio of 5 (1,000p/200p)
Now, as per the above, we are left with a P/E ratio of 5 – which at this point, doesn’t really tell us too much. In other words, to assess whether this represents an overvalued or undervalued stock, we need to compare it to something.
In order to do this, seasoned investors will look to see what the average P/E is in the respective sector.
- Let’s say that the P/E ratio of 5 relates to a stock active in the UK telecommunications sector
- We’ll then say that on the FTSE 100, telecommunication stocks have an average P/E ratio of 20
- This means that at a P/E ratio of 5, the stock is potentially undervalued and thus – cheap
- However, if the P/E ratio was above the sector average, the stock could be overvalued
In late 2021, there are still plenty of opportunities to buy a collection of cheap UK stocks. After all, many sectors are yet to recover from the pandemic – especially in terms of the stock price action. As such, you need to focus on companies that you think will perform well once the vaccine rollout comes to its conclusion.
In the UK, the government has set a target of all adults receiving their first vaccine dose by July. If this does come to fruition, then there is every chance that the economy will begin to reopen.
When it does, the likes of Paypoint, Cineworld, and many others that rely on bricks-and-mortar cash inflows will benefit tremendously.
Look for ‘Overactions’ From the Market
The markets will often overreact when a news story breaks on a stock that is deemed negative.
- When Tesla founder and CEO Elon Musk smoked marijuana on the Joe Rogan Podcast in 2018 – the stocks plummeted by 10% in the first hour of trading the following morning.
This is a prime example of an overreaction, as Tesla stocks have since exploded by over 1,200%. Similarly, stocks will often take a rapid, but short-lived downturn when a quarterly earnings report is less favorable than Wall Street had anticipated.
- If the stock had projected quarterly growth of 4% but in fact, this stood at just 3%, you can be all-but-certain that the shares would decrease as soon as the report was published.
- However, the key point here is that the reaction from the markets is often unwarranted.
- In many cases – and assuming that the long-term fundamentals of the stock remain strong – the shares will bounce back within days.
Review of Online Stock Brokers offering Cheap Stocks
Once you have figured out which cheap stocks you wish to buy, you then need to find a suitable stock broker or stock trading app. Not only does the broker need to offer your chosen shares, but it must do so at a reasonable commission.
You also need to look at metrics surrounding regulation, supported payment methods, and the minimum investment amount required.
How to Buy Cheap Stocks in the UK
Ready to buy cheap stocks in the UK from the comfort of your home? If so, you can complete the process in less than 10-minutes with a broker of your choice. Plus, irrespective of whether the cheap stock is UK-based or international – you won’t pay a single penny in commission.
Here’s what you need to do to buy shares with your preferred trading platform:
Step 1: Open an Account and Upload ID
Opening an account at your preferred broker usually takes minutes. Head over to the provider’s homepage online or via your phone – and click on the ‘Join Now’ button.
You will then be asked to enter the following information:
- First and Last Name
- Home Address
- Date of Birth
- Mobile Number
- Email Address
- National Insurance Number
- Username and Password
After that, you will be asked to upload a copy of your passport/driver’s license and proof of address. You can upload the document through your desktop device or simply take a clear picture with your mobile phone.
Step 2: Make a Deposit
Before you can invest in cheap stocks, you will need to add some funds to your share dealing account. You can do this with a UK debit/credit card or an e-wallet such as Paypal, Skrill, or Neteller.
Step 3: Search for Cheap Stocks
If you have read this guide on cheap shares to buy now, then you likely already know which stocks you wish to buy. If so, all you need to do is search for the stock at the of the page.
Step 4: Buy Cheap Stocks
The final part of the process requires you to complete an order form. As soon as you click on the ‘Trade’ button next to the cheap stock you wish to buy, this will automatically populate on-screen.
Then, you need to enter the size of your investment in the ‘Amount’ box. Irrespective of which exchange the cheap stocks are listed on (UK or otherwise).
Finally, click on the ‘Open Trade’ button to buy your chosen cheap stock.
Cheap stocks allow you to invest in a company when its share price is lower than its perceived, intrinsic value. The most challenging part is, of course, finding the cheap stocks for your financial goals.
The stock in question might be cheap because of the impact of COVID-19 on the respective sector. Or, the stock might be carrying a low P/E ratio that illustrates the company is undervalued.
Either way, you need to ensure that you choose a trusted and low-cost UK broker to facilitate your cheap stock investments.