Categories
Coupons & Offers

2 cheap UK shares I’d buy during this stock market recovery

After a sharp decline in March 2020, UK shares have bounced back remarkably in the months since the first onset of the Covid-19 pandemic.
The primary UK stock index, the FTSE 100, has gained more than 26% since its low of 4,993p on 23 March last year, …

After a sharp decline in March 2020, UK shares have bounced back remarkably in the months since the first onset of the Covid-19 pandemic. The primary UK stock index, the FTSE 100, has gained more than 26% since its low of 4,993p on 23 March last year, as optimism around vaccination programmes drives the latest stock market rally.  While there may be a correction in the index in response to the latest rally, I believe there are still some cheap UK shares that I would buy to add to my portfolio or Stocks and Shares ISA.

These are two FTSE 100 constituents with a long history of providing returns to investors.

Spring clean

Reckitt Benckiser (LSE:RB) is a company few consumers may have heard of, but many buy their products on a regular basis. It is a leading consumer goods company with a portfolio of brands including Dettol, Clearasil, and NurofenThe company's sales have shot up during the pandemic, due to having a primary focus of hygiene and health products.  Reckitt lifted its full-year revenue guidance in October after its third-quarter sales jumped as the pandemic boosted demand for its disinfection brands. In its most recent earnings report, sales were 12.4% higher in the year to date at GBP10.4bn. I can see this demand continuing for years to come as many of our hygiene habits could be here to stay.

The Reckitt share price has not been performing as well as its sales would suggest, however. The stock has slumped more than 16% in the last six months, and only gained around 5% in the last five years. That said, Reckitt is very much a defensive stock and with further volatility potentially coming down the line for the stock market, it is certainly still one I'd add to my portfolio.

On the defensive...

Defence contracting company BAE Systems (LSE:BA) is another cheap UK share I think could provide my portfolio with decent returns in the long term.

The company has come through the Covid-19 crisis relatively unscathed in comparison to some of its fellow FTSE 100 constituents in terms of sales, with no major sign of a reduction in demand for its products from the governments it sells to. BAE has consistently increased its dividend payout every year since as far back as 2003, and while there is a possibility of this not being raised further in 2021 it should be maintained at the very least. Trading off a price-to-earnings ratio of 10 and with a dividend yield of just under 5%, to me this share seems to provide value as an income stock.

The market suggests otherwise at the moment, with the shares now down almost 27% in the last year. There is risk involved in that if a handful of countries were to reduce their defence spending, BAE's revenue would be adversely affected. However, looking at current trends I don't see that happening over the next five years and would buy BAE shares for my portfolio today.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic... And with so many great companies trading at what look to be 'discount-bin' prices, now could be the time for savvy investors to snap up some potential bargains. But whether you're a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be daunting prospect during such unprecedented times.

Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down... You see, here at The Motley Fool we don't believe "over-trading" is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm. That's why we're sharing the names of all five of these companies in a special investing report that you can download today for FREE.

If you're 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.

Click here to claim your free copy of this special investing report now!

conorcoyle has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.