Interactive Investor

Dinah Wolf: where I’m finding cheap stocks now

31st August 2021 10:43

Dinah Wolf from interactive investor

Loading

Share on

Everything seems more expensive these days, but our Gen Z columnist knows where to discover better value. 

Froth is spilling over. No, not the kind that is atop your beers and baths, the (unwanted) sort that erupts from red-hot markets spurred on by seemingly endless money printing. (Warning: the ink is running low!) Even bitcoin is back above $50,000 and there’s a house price boom underway.

The S&P 500 and its tech buddy the Nasdaq have soared to new heights only to (finally) break their winning streaks and come up for air. The pack was led by the golden boys (dominating 50% of the Nasdaq index) who have all smashed earnings season. Yippee. 

Now, if you’re a sceptic like me, you may be asking whether all the good news is already priced in; markets are, after all, forward-looking creatures. 

While the US market is undoubtedly trading at chunky premiums (to put it mildly), there are still bargains to be bagged. But you’ll have to be prepared to cast your net a little further afield. 

Beijing’s recent wave of regulation sent stock market investors fleeing as they ditched their (now pre-loved) Chinese tech stocks. Just look at Tencent (SEHK:700) and Alibaba’s (NYSE:BABA) recent tumble. Ouch!

But it’s precisely times like these, when everyone is scrambling for the exit, that you should walk right in. Or, as Warren Buffett likes to put it: “Be greedy when others are fearful”.

To add some spice to the mix, a handful of rather smart folk reckon that China is no longer an emerging market. If this is the case, you’ll certainly want this superpower to take up (a lot) more space on your (already crowded) sofas. Grab your popcorn and make some room. 

Moving on to the UK, my nearest and dearest. 

This market remains (very, very) cheap by all accounts. Many investors make the mistake of thinking that the UK is oil & gas and all things mining. Yes, there is that, but our stock market is so much more. 

If you’re on the lookout for some growth, there are a host of companies waiting to be snapped up. 

Deliveroo (LSE:ROO) has recovered from its soggy (and ever-so-slightly embarrassing) IPO and is now dishing out tasty returns for my portfolio (I’m up 40%). Darktrace (LSE:DARK) has shed 23% of its share price since doubling in value to its July peak. With the door left ajar, I opened it wide and liked what was inside. 

After bagging these newbies and glamming up my ISA, I realised that some oldies were left behind. Take insurer Legal & General (LSE:LGEN): it’s trading at a piddly price/earnings (PE) ratio of 6.9 (50% below the market average) and gifts investors a whopping 6.6% dividend yield. Don’t mind if I do! 

Go on, have a rummage through the FTSE, for there are some stellar bargains to be found. Tip: Look for stocks trading at historically low PE ratios paying hefty dividends. 

I believe there’s (always) a seat for growth in a portfolio but don’t neglect the suite of solid, established cash cows because when inflation bites, they’ll be your saving grace. 

So, loosen those purse-strings and snap up these beautiful bargains. Something tells me they won’t stick around forever. 

Happy hunting!   

Dinah owns shares in Deliveroo, Darktrace and L&G.

Dinah Wolf is a freelance contributor and not a direct employee of interactive investor.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

Disclosure

We use a combination of fundamental and technical analysis in forming our view as to the valuation and prospects of an investment. Where relevant we have set out those particular matters we think are important in the above article, but further detail can be found here.

Please note that our article on this investment should not be considered to be a regular publication.

Details of all recommendations issued by ii during the previous 12-month period can be found here.

ii adheres to a strict code of conduct.  Contributors may hold shares or have other interests in companies included in these portfolios, which could create a conflict of interests. Contributors intending to write about any financial instruments in which they have an interest are required to disclose such interest to ii and in the article itself. ii will at all times consider whether such interest impairs the objectivity of the recommendation.

In addition, individuals involved in the production of investment articles are subject to a personal account dealing restriction, which prevents them from placing a transaction in the specified instrument(s) for a period before and for five working days after such publication. This is to avoid personal interests conflicting with the interests of the recipients of those investment articles.

Get more news and expert articles direct to your inbox

Sign up for a free research account to get the latest news and discussion, and create your own virtual portfolio.

Free Sign Up