I love a stock market bargain. So I’m delighted that there are plenty of cheap UK shares for me to choose from following 2022’s market volatility.
Here are some of the most popular value stocks with investors using Freetrade’s platform. Should I add them to my own portfolio this year?
Big banks
FTSE 100 banks Lloyds and Standard Chartered are both extremely popular right now. Freetrade analyst Sweeney says the latter has “textbook credentials for a value stock,” the business trading on a price-to-earnings (P/E) multiple of 9.4 times and a price-to-book (P/B) ratio of 0.4. In fact the analyst has said StanChart could be “a value stock to watch”.
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As a long-term investor, I’m inclined to agree. The bank has significant exposure to China, a market which could struggle in 2023 as Covid-19 infections there explode. But I think a focus on Asia and Africa could produce big shareholder returns in the coming decades.
Personal wealth levels are tipped to grow strongly, meaning demand for financial services should also soar from current low levels.
Not loving Lloyds shares
As for Lloyds, Sweeney notes that it trades on a forward P/E ratio of 7.6 times and carries a P/B ratio of 0.6. He suggests that higher interest rates could boost investor interest for the share in 2023. A higher rate boosts the difference between the rates banks can offer savers and borrowers, giving profits a shot in the arm.
But I’m not tempted to buy Lloyds shares today. Not even a current 5.8% forward dividend yield is enough to encourage me to invest.
The British economy could be set for prolonged weakness on a multitude of colossal structural problems. And UK-focused banks like this face weak revenues growth and higher-than-usual loan impairments for years to come.
Other FTSE 100 heavyweights
I’d much rather buy Legal & General Group shares for my own portfolio, another popular stock with Freetrade customers. As Sweeney notes, the financial services company trades on a forward P/E ratio of 7.6 times and carries a P/B ratio of 1.4.
At current prices, Legal & General also carries a mighty 7.9% dividend yield. The FTSE 100 firm faces high levels of competition that can take a big bite out of profits. But I still expect earnings here to rise strongly as a steadily growing elderly population drives demand for pensions and other retirement products.
Tobacco manufacturer Imperial Brands has also been in high demand of late. It boasts a forward P/E ratio of 12.8 times and a P/B ratio of 2.9. And its dividend yield sits at 7.2%.
But I wouldn’t buy this FTSE index share today. I like the exceptional pulling power of its brands like Lucky Strike and Winston. However, the long-term future of Imperial Brands remains highly uncertain as laws around the use of cigarettes and vaping products steadily tighten.
