With two waves of the Coronavirus wreaking havoc on the UK stock market within the same year, uncertainties are at an all time high. Share prices are well below their peaks, which has given some shareholders a spanking, while others have gotten the chance to score great bargains toward their investment portfolios.
We recently discussed how the Trump vs. Biden elections could impact the UK market, discussing industries as a whole. Now that we have a winner and with Brexit issues being halted, we would like to highlight 2 shares that we believe can begreat assets for you.
Our selection criteria for the selected cheap UK shares revolved mostly around two major considerations: 1.Potential to rise back up as London Stock Exchange sees a bullish trend – regardless of how long the second wave lasts or even if there is a third wave, and
2.Avoiding value traps
When looking for cheap UK shares in this market, it is important not to focus only on price, but also onwhy they’re currently in a price pit. You need to consider whether the share price has fallen because of a permanently damaged business or a temporary setback.
The two UK shares we would recommend you include in your investment portfolio are Galliford Try (LSE: GFRD) and Babcock (LSE: BAB).
The first thing investors should know about the construction company is their relatively strong financial position (as can be seen from the excerpt below).
The share price of the construction company has plummeted, but that was mostly due to the demerger to Bovis Homes PLC. (LON: VTY) at the start of 2020. Come June 2020, the company reported liquid cash at £197 million – which is well above its market capitalization, which stood at £112 million. This could serve as a backup for investors since even if Galliford went bankrupt, it it is more likely to pay out a larger portion of the amount owed to investors.
However, the money is projected to focus on the company secured toward residential building schemes and governmental infrastructure projects. This is partly because of the increased demand for warehouses in the country (because of Brexit and COVID stockpiling) and the government being keen on strengthening infrastructure.
As more and more projects head Galliford’s way, we can expect a recovery play (bullish trend) to follow. One indicator of that is its announcement of resuming dividend payouts in 2021 – and that too, quite early on.
There is some time before the recovery, but it is bound to happen.
Babcock (LSE: BAB) is a defence share that went to the infirmary in bad condition, but is now primed to come out and expect a good recovery. The defence contractor builds battleships, aircraft carriers, submarines, transport vehicles, helicopters and more for the government.
The company suffered mostly due to the reduced oil and gas prices, but now that the sector is gaining traction, you can expect the share price to go up as well.
Being crucial to the defence sector (considered one of the top contractors), Babcock is expected to weather the storm it’s currently facing, especially after Brexit.
If you look at the current market sentiment as a whole, despite the second wave, these companies seem to be recovering. Last month, both shares saw a significant rise in share prices; a trend that is likely to continue over the upcoming months.
Apart from these two shares, Taylor Wimpey (LSE: TW) and Kingfisher(LSE: KGF) are both good FTSE 100 UK shares to buy as well – but they aren’t really cheap.
Disclaimer: All investments involve risk and you should only invest capital that you can afford to put at risk. The content of this report is not financial promotion or investment advice. It is general information for reading purposes and you should speak to a financial advisor before investing.