2 cheap shares to buy in May

Our writer discusses a pair of cheap shares to buy for his portfolio in the coming month — and why he thinks they offer him value.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

sdf

Like many investors, I feel happy when I find cheap shares to buy for my portfolio. That is not just about their share price, though. I also try to invest in businesses that I think have strong commercial prospects and could do well in future.

Here are a couple of shares I think are attractively valued and that I would consider adding to my portfolio in the coming month.

Insurance is a fact of life for millions of people. Whether it is vehicle insurance or a home policy, people typically make sure that they always have an insurance policy in force. That means that the revenue outlook for the industry is robust.

Should you invest £1,000 in Legal & General right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Legal & General made the list?

See the 6 stocks

Of course, customers could shop around between different providers looking for the right cover for them. That is one of the reasons I am attracted to Legal & General (LSE: LGEN). Its familiar name, long   history, and iconic umbrella logo are familiar to millions of people. That can help the company keep its customer acquisition costs under control but still attract new clients.

There is more that I like about the business. Its price-to-earnings ratio of less than eight looks like good value to me. On top of that, the company offers a dividend yield of 7%. That could make it an attractive passive income choice for my portfolio.

One concern I have is if new insurance pricing rules introduced this year lead to lower profit margins. Then again, they could turn out to be a boon for companies with strong brands, like Legal & General, if customers worry less about pricing policies and focus more on a company’s reputation.

Unilever

A second company I would consider buying in May is consumer goods giant Unilever (LSE: ULVR).

The P/E ratio here is a much higher 19. So, although the 3.8% dividend yield is attractive, why do I rate the firm among cheap shares to buy now for my portfolio?

The answer lies in its asset base of iconic brands from Knorr to Surf. Does a total market capitalisation of £90bn adequately value the potential profit-making ability of this collection of iconic names in future? I am not sure it does.

Cheap shares to buy now

Last year, the company made post-tax profits in excess of £5.5bn. Its huge customer base means Unilever products are used 2bn times a day or more somewhere around the globe. Admittedly, rising costs could hurt profit margins. But I see that as a short-term issue. As an investor I focus on the long term. I think Unilever’s iconic brands could allow it to continue charging premium prices and making large profits far into the future.

That is why I think it is among cheap shares to buy in May for my portfolio.


Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Christopher Ruane owns shares in Unilever. The Motley Fool UK has recommended Unilever. 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.

More on Investing Articles

British coins and bank notes scattered on a surface
Investing Articles

Here’s how to target a £8,794 annual second income, starting from zero

Putting some money into the stock market on a regular basis is one way to try and earn a second…

Read more »

Rear view image depicting a senior man in his 70s sitting on a bench leading down to the iconic Seven Sisters cliffs on the coastline of East Sussex, UK. The man is wearing casual clothing - blue denim jeans, a red checked shirt, navy blue gilet. The man is having a rest from hiking and his hiking pole is leaning up against the bench.
Investing Articles

Prediction: in 12 months Aviva and Tesco shares could turn £10,000 into…

Harvey Jones is still kicking himself for failing to buy Aviva and Tesco shares, which have done brilliantly over the…

Read more »

Portrait of pensive bearded senior looking on screen of laptop sitting at table with coffee cup.
Investing Articles

Prediction: in 12 months Glencore and Diageo shares could turn £10,000 into…

Harvey Jones says his Diageo shares have shown signs of life lately, and even his holding in FTSE 100 miner…

Read more »

Tesla building with tesla logo and two teslas in front
Investing Articles

If Tesla stock comes crashing down to earth, here’s my plan of action

Tesla stock has gone up 57% in the past year despite the business's challenges. Our writer isn't ready to invest…

Read more »

Rear View Of Woman Holding Man Hand during travel in cappadocia
Investing Articles

Here’s how investing £700 a month could unlock a £48,000 second income

Earning nearly £50k a year in dividends may sound like a pipe dream. Yet this writer reckons such a sizeable…

Read more »

Rolls-Royce's Pearl 10X engine series
Investing Articles

3 reasons I don’t own Rolls-Royce shares

Rolls-Royce shares have had a stunning few years. This writer sees things to like about the company -- so why…

Read more »

Close-up of British bank notes
Investing Articles

How much money could a £5-a-day passive income plan earn?

Christopher Ruane explains some of the variables that come into play when considering the passive income potential of stock market…

Read more »

Engineer Project Manager Talks With Scientist working on Computer
Investing Articles

2 up-and-coming UK growth stocks that could benefit from the AI boom

Our writer examines the groundbreaking tech of two small growth stocks that may be critical in the world of AI.…

Read more »