2024 promises to be a busy year politically with a widely anticipated general election looming in the UK later this year, although UK prime minister Rishi Sunak has yet to call it, and the US Presidential election due. Unfortunately, the conflict between Israel and Hamas continues without any immediate hope of resolution.
Meanwhile, the UK economy expanded for the second consecutive month in February, thanks to growth in the manufacturing sector. GDP (gross domestic product) grew by 0.1% between January and February, according to the Office for National Statistics, boosting hopes that the UK may come out of its technical recession.
Here are some of the best cheap UK shares we think are worth watching, given these themes.
Best UK cheap shares to watch
These stocks have been selected for recent market news. Always do your own research. Past performance is not a guide to future performance.
- YouGov
- Legal and General
- Vodafone
- Imperial Brands
- Fresnillo
YouGov (YOU:LON)
2024 is a busy year for YouGov, which conducts surveys on behalf of businesses and political parties around the world. With the Presidential Campaign heating up in the US and a likely general election in the UK later this year, the company has its work cut out.
What’s more, it recently made a major acquisition, buying German company Consumer Panel Services of GfK, which should boost its panel offering. However, the shares dipped recently following the half-year results as profits halved due to the costs of the acquisition and a slower than expected first quarter. YouGov says the sales cycle seems to be taking longer than usual to complete given the uncertain economic environment. Nevertheless, the company’s work pipeline looks strong with more than 75% of revenues already in the bag for 2024.
The shares are up 9% this year overall and trade on a price earnings ratio of around 20, however this is lower than its historical PE, which is in the mid-30s.
Legal & General (LGEN:LON)
Insurer recently unveiled a relatively resilient set of full year results under its new chief executive António Simões. Although operating profits remained flat at £1.67 billion (£1.66 billion in 2022), the company enjoyed record volumes across its businesses, with £13.7 billion of institutional annuities coming in.
Meanwhile, Simões is currently undertaking a strategic review of the business and nothing is off the table, with analysts speculating that Cala Homes could be sold off. However, Simões remained tight-lipped about the company’s plans at the results. The outcome of the strategic plan will be shared with investors at the capital markets day on 12th June.
The shares are up 4% this year but are still trading some distance away from their three-year highs of 299.6p in April 2021. The 8% yield is also attractive for income seekers.
Vodafone (VOD:LON)
Vodafone shareholders may be heaving a sigh of relief that chief executive Margherita Della Valle, who took over from previous CEO Nick Read last year, is similarly engaged in a strategic review of the business. The shares have underperformed for some time and have fallen by 25% this year alone. However, Della Valle is making headway, with Vodafone Italia now sold to Swisscom for €8 billion and Vodafone Spain also sold.
The company also recently announced that it plans to return €4 billion to investors following the deals. Vodafone stock may also be of attraction to income seekers given it currently yields 11%. However, one concern is the expected Competition and Markets Authority probe into Vodafone’s merger with peer Three, owned by CK Hutchinson.
Source: Bloomberg
Imperial Brands (IMB:LON)
Investing in tobacco shares isn’t for everyone but income seekers may have their interest piqued. Imperial Brands, which owns lines such as Davidoff and Golden Virginia, is highly cash generative and currently has a dividend yield of 9%. What’s more, the company is also returning £2.4 billion to investors in the full year 2024.
Shares in the tobacco giant are down 9% over the past 12 months and trade on a price earnings ratio of just 7. While the traditional tobacco market is seeing volumes decline generally, Imperial is seeing market share gains across three out of five of its markets – in the US, Spain and Australia. This boosted pre-tax profits for the year to £3.1 billion from £2.6 billion in 2023. The next generation vaping market is also growing, with sales up 26% in 2023.
Fresnillo (FRES:LON)
The gold price has hit all-time highs due to the uncertainty driven by conflict in Gaza and the Ukraine, so gold mining companies may be worth a look for those with the appropriate risk appetite. Fresnillo is quoted on the UK stock exchange and has its headquarters in the UK but mines for gold and silver in Mexico. It has had a difficult time recently due to rising inflation and currency issues – the Mexican peso has been strong against the US dollar, increasing costs. In addition, robbers broke into its mines, stealing $22 million of gold. As such, the shares are down 37% this year.
However, recent full year profits were reassuring, with turnover up by 11% to $2.7 billion, although profits were down by 6.5% to $288 million. Plus, Fresnillo is busy trimming its cost base and it delivered on its production targets for 2023, producing 105 million silver equivalent ounces. The shares trade on a relatively undemanding PE of 18.7.
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The Best cheap UK shares to watch summed up
There are a number of different shares that may benefit from these themes – these are just a small number of stocks to watch. Always do your own research. Past performance is not a guide to future performance.
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*Based on revenue excluding FX (published financial statements, October 2021).
