After the recent market crash, many stocks are currently trading at low valuations. This could be the perfect opportunity for long-term investors, as research shows buying stocks at low valuations is the best way to produce high returns in the long run.
With that in mind, here are three cheap UK shares I’d buy today.
Stock market crash bargain
The bank formerly known as RBS, NatWest Group (LSE: NWG), has been a pretty poor investment to own this year. It’s clear why investor sentiment towards the business has plunged in 2020. Ultra-low interest rates coupled with rising loan defaults have weakened the group’s balance sheet and eliminated profits.
As it’s unclear when the coronavirus crisis will conclude, these headwinds may persist for some time. However, despite these issues, after the stock market crash, NatWest stands out as one of the cheapest stocks on the London market.
Shares in the banking giant are changing hands at a price-to-book (P/B) ratio of just 0.3. That’s compared to the market average of 1.2.
As such, it looks as if the stock offers a wide margin of safety from current levels. It may also have the potential to double or triple from current levels if investor sentiment improves.
Another company I’ve my eye on today is Just Group (LSE: JUST). This business is facing similar headlines to NatWest. But just like the banking giant, the shares look cheap at current levels after the stock market crash. The shares are changing hands at a forward P/B of 0.2.
Considering the extreme uncertainty facing many companies at present, I think the P/B ratio is a good way of establishing value. This gives us some indication of the company’s asset value, which is less volatile than earnings. It also provides a great idea of how much the business could be worth in a takeover or liquidation situation.
Just provides retirement products, so its income is more stable than other businesses. This implies the group also has more headroom to navigate the current crisis. It could even emerge stronger on the other side if it can use its strong balance sheet to acquire peers.
Bank of Georgia Holdings
As cheap UK shares go, Bank of Georgia Holdings (LSE: BGEO) is an exciting opportunity. For a start, the company isn’t a UK business. This is both a benefit and a drawback. Because it’s not a household name in the UK, investor sentiment towards the business has always been lower than other financial companies.
However, the group’s presence in Georgia, which was one of the fastest-growing economies in Europe, gives it an edge over UK peers. For example, over the past six years, group net income has nearly doubled. Many UK banks would kill for that kind of growth.
After the recent stock market crash, shares in the Georgian bank are changing hands at a P/B value of 0.8. The coronavirus crisis is expected to have an impact on the group’s income this year, although the stock was already relatively cheap before.
Even with a near 50% decline in earnings expected for 2020, the stock is trading at a forward price-to-earnings (P/E) multiple of 6.6. This combination of value and growth is incredibly rare to find, making Bank of Georgia somewhat of a hidden gem.
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Rupert Hargreaves 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.
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