UK stocks are cheap! Some of us have been saying it for years. The valuations of some of Great Britain’s best and brightest companies compare very favourably to international competitors. And the 2020’s have offered many a bargain for those with the patience and wherewithal to find them.
An example? easyJet (LSE: EZJ) springs to mind. The airline’s agreed takeover (in the final stages, but not over the finish line just yet) will give investors who bought at the low a 100% return in only a few months. I was fortunate enough to spot the opportunity earlier this year too. Here’s why I bought in, and one other cheap-looking stock that has caught my eye in today’s market.
What happened?
Earlier this year, easyJet was trading at a price-to-earnings ratio of below 6, one of the lowest valuations on the London Stock Exchange. In other words, I’m paying just £6 for a single share earning £1 yearly profit.
That’s not to say this single metric made it a slam-dunk buy. Airlines have been grappling with numerous problems. Chief among them, perhaps, was the Iran war that threatened to send fuel costs sky-high. Still, I thought one of Europe’s most reputable budget airlines was underpriced and took the plunge.
What happened next? Investment firms saw the opportunity too. An easyJet takeover made headlines again and again. After a fair bit of wrangling (between two prospective buyers!), a 715p per share buyout was agreed upon.
Bear in mind, the shares changed hands for only 339p back in May! In just a few months, an investor could have doubled their money buying in at the low.
And looking at the UK more broadly, it’s hard not to see a trend developing. The FTSE 100 still trades at a deep discount to the S&P 500 in absolute terms. And that might be why London’s premier index has seen five completed or agreed takeovers this year already. Not to mention takeovers outside the Footsie, notably the Hotel Chocolat sale a couple of years ago.
Other options?
With the takeover agreed and set to go ahead early next year, easyJet isn’t perhaps one investors should be looking at today. So what similar bargains might be out there? The FTSE 100‘s only airline – British Airways owner IAG (LSE: IAG) – might fit the bill. It’s trading at one of the lowest P/Es on the index of just 8.26.
This cheap valuation isn’t because of a worrying share price drop either. Rather, the shares have been booming. The recovery from the pandemic is in full swing – the price is up 370% since 2022!
IAG isn’t a budget airline, which is a double-edged sword. On the one hand, if more inflation comes our way then folks might cut back on pricier intercontinental flights. On the other, business travel on more expensive flights tends to be more resilient than consumer travel.
There are no guarantees that a stock will be a good buy just because it looks cheap. That said, I think there’s enough here to make IAG worth considering. I may even buy it myself if and when my easyJet shares are sold.
Should you invest £5,000 in easyJet Plc right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie 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 easyJet Plc made the list?
John Fieldsend owns shares in easyJet.
UK stocks are cheap! Some of us have been saying it for years. The valuations of some of Great Britain’s best and brightest companies compare very favourably to international competitors. And the 2020’s have offered many a bargain for those with the patience and wherewithal to find them.
An example? easyJet (LSE: EZJ) springs to mind. The airline’s agreed takeover (in the final stages, but not over the finish line just yet) will give investors who bought at the low a 100% return in only a few months. I was fortunate enough to spot the opportunity earlier this year too. Here’s why I bought in, and one other cheap-looking stock that has caught my eye in today’s market.
What happened?
Earlier this year, easyJet was trading at a price-to-earnings ratio of below 6, one of the lowest valuations on the London Stock Exchange. In other words, I’m paying just £6 for a single share earning £1 yearly profit.
That’s not to say this single metric made it a slam-dunk buy. Airlines have been grappling with numerous problems. Chief among them, perhaps, was the Iran war that threatened to send fuel costs sky-high. Still, I thought one of Europe’s most reputable budget airlines was underpriced and took the plunge.
What happened next? Investment firms saw the opportunity too. An easyJet takeover made headlines again and again. After a fair bit of wrangling (between two prospective buyers!), a 715p per share buyout was agreed upon.
Bear in mind, the shares changed hands for only 339p back in May! In just a few months, an investor could have doubled their money buying in at the low.
And looking at the UK more broadly, it’s hard not to see a trend developing. The FTSE 100 still trades at a deep discount to the S&P 500 in absolute terms. And that might be why London’s premier index has seen five completed or agreed takeovers this year already. Not to mention takeovers outside the Footsie, notably the Hotel Chocolat sale a couple of years ago.
Other options?
With the takeover agreed and set to go ahead early next year, easyJet isn’t perhaps one investors should be looking at today. So what similar bargains might be out there? The FTSE 100‘s only airline – British Airways owner IAG (LSE: IAG) – might fit the bill. It’s trading at one of the lowest P/Es on the index of just 8.26.
This cheap valuation isn’t because of a worrying share price drop either. Rather, the shares have been booming. The recovery from the pandemic is in full swing – the price is up 370% since 2022!
IAG isn’t a budget airline, which is a double-edged sword. On the one hand, if more inflation comes our way then folks might cut back on pricier intercontinental flights. On the other, business travel on more expensive flights tends to be more resilient than consumer travel.
There are no guarantees that a stock will be a good buy just because it looks cheap. That said, I think there’s enough here to make IAG worth considering. I may even buy it myself if and when my easyJet shares are sold.
Should you invest £5,000 in easyJet Plc right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie 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 easyJet Plc made the list?
John Fieldsend owns shares in easyJet.
