5 Best Cheapest Stock Options for Smart Investors Today

You don’t need deep pockets to invest in the stock market; there are many of the best cheap stocks with good fundamentals and growth potential out there at discounted prices. In this article we will look at the 5 cheapest stocks that could be smart picks for today’s investors.

1. Lloyds Banking Group PLC

Description

Lloyds Banking Group PLC is one of the biggest financial institutions in the domestic UK market, retail and commercial banking. Despite the challenges in the banking sector Lloyds is a steady as a rock in the UK stock market.

Why Lloyds is Good

• Current Price: Lloyds is at a good price, a cheap stock for long term investors.
• Barclays Dividend Yield Comparison: Lloyds has a competitive dividend yield, stable returns in volatile markets.
• Balance Sheet: Robust balance sheet and improving net interest margins, a safer bet among cheap stocks.

Key Stats

• P/E: 6.5, plenty of upside.
• Fair Value: Below fair value according to analysts.

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2. National Grid PLC

Description

National Grid PLC is a utility company specialising in energy infrastructure in the UK and US. Resilient, National Grid is a favourite among conservative investors.

Why National Grid is a good pick

• Infrastructure Investment: The company is investing heavily in renewable energy infrastructure, long term growth, and has announced a significant £60bn capital investment over the next five years. This major financial commitment is expected to support growth and infrastructure improvements, significantly impacting stock performance and investor perception.
• National Grid Share Price: Despite the recent fall, the current national grid share price is an undervalued opportunity for income investors, reflecting its valuation and performance over time. The fluctuations in its price due to significant capital investments and a recent drop in profits highlight its relatively stable earnings as a natural monopoly, leading to direct implications for potential investment decisions.
• Barclays Recommendation: Many analysts recommend National Grid for its steady as a rock valuation and high dividend yield.

Key Stats

• Dividend Yield: 5.2%.
• P/E: 11.8, reasonable for a bank.

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3. Barclays PLC

Description

Barclays PLC, a global investment bank, has seen its share price fall recently due to market volatility. However, the Barclays share price has shown impressive growth over the past year, making it a favorable investment despite broader economic concerns. With a low price-to-earnings ratio compared to its peers on the FTSE 100, Barclays presents a good long-term play.

Why Barclays is a buy?

• Price Reduced: Current price is at a lower price, a good entry point.
• Diversified Business: Barclays operates in many sectors, wealth management and corporate banking.
• Pre-Tax Profit: Barclays reported good pre-tax profits, it can navigate the challenges.
• Investment Banking Arm: Barclays’ investment banking arm has shown strong performance due to its exposure to the U.S. market. This division provides Barclays with a competitive advantage, potentially benefiting the bank amidst economic fluctuations and changes in interest rates.

Key Stats

• Barclays Dividend Yield: 4.8%.
• P/E: 8.9, undervalued against peers.

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4. Vodafone Group PLC

Description

Vodafone Group PLC is a global telecommunications giant, operating in Europe, Asia and Africa. The stock has been under pressure, making it a cheap share for bargain hunters. In the current market climate, cheap shares like Vodafone are particularly attractive investment opportunities. Identifying quality value stocks that are undervalued, such as Vodafone, can offer significant growth potential despite not always being priced high.

Why Vodafone is Good?

• Infrastructure Investment: The company is investing in 5G and fibre infrastructure, growth will follow.
• Motley Fool UK View: Analysts at Motley Fool UK think Vodafone’s long term is solid despite short term challenges.
• Fair Value: Vodafone is trading below its intrinsic value.

Key Stats

• Dividend Yield: 6.4%, highest in its sector.
• Current Price: A low price for retail investors.

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5. Taylor Wimpey PLC

Description

Taylor Wimpey PLC, one of the UK’s biggest housebuilders, is another cheap stock to look out for. Despite the housing market slowdown, the fundamentals are still good.

Why Taylor Wimpey is a buy

• P/E Ratio: The P/E is much lower than the industry average.
• Market Trend: Analysts expect the housing market to bounce back, benefiting Taylor Wimpey.
• Dividend Policy: The company is still paying dividends, returning cash to shareholders.

Key Stats

• P/E: 7.3, undervalued.
• Dividend Yield: 5.5%, good for income investors.

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Things to consider when buying cheap stocks

1. Market Cap

• Low market cap companies can offer high growth but higher risk.

2. Dividend Yield

• Stocks with good dividend yields like Lloyds and Vodafone will return cash to you even in a market downturn.

3. Valuation Metrics

• P/E ratio, net interest margins, fair value to find undervalued stocks.
• Look for stocks trading near their 52-week low point. This strategy helps identify potential investments that the market may have temporarily undervalued. By focusing on these stocks, you can filter out riskier companies and concentrate on those with strong growth potential and solid financial health indicators.

4. Industry Trend

• Companies in high growth industries like technology or utilities with a good track record.

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Benefits of buying cheap stocks

1. High Upside

• Low priced stocks have a lot of upside when the market corrects.

2. Diversification

• Adding undervalued or cheap stocks reduces overall portfolio risk.

3. Accessibility

• These stocks allow you to build a diversified portfolio with minimal capital.

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FAQs

Which stock is the cheapest?

Vodafone and Taylor Wimpey are the cheapest, good entry points for investors.

What are the cheapest shares to buy?

Lloyds Banking Group and National Grid are the cheapest with good fundamentals and growth.

What is the best stock under £10?

Taylor Wimpey PLC is a good one for income investors.

What will boom in 2025?

Analysts expect stocks in the renewable energy and telecommunications sectors, National Grid and Vodafone, to boom by 2025.

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Summary

Buying cheap stocks is a great way to make long term gains when the underlying companies are good. Lloyds Banking Group, National Grid and Vodafone are top picks for value, dividend and growth. Now you know the valuation metrics, market trends and industry dynamics, go and make a better investment decision and build your portfolio.