October 5, 2024
No savings at 40? I’d buy cheap UK shares to try and retire richer #UKFinance

No savings at 40? I’d buy cheap UK shares to try and retire richer #UKFinance

CashNews.co

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Snapping up some UK shares right now may not seem all that sensible. After all, both the FTSE 100 and FTSE 250 have had a terrific run throughout 2024, both rising significantly more than their annual average. And usually, after such a rally, prices eventually start to cool off.

Yet, while this might be true for some top-performing stocks in 2024, not all shares have been so fortunate. And many continue to trade at seemingly cheap valuations.

We’ve already seen countless times the power of investing in quality companies trading at a discount. So, for investors with little to no retirement savings, snapping up bargains right now could significantly improve their long-term financial position.

The best place to invest right now?

When it comes to hunting down terrific buying opportunities, history has shown countless times the best place to start looking is where nobody else is. Therefore, zooming in on beaten-down enterprises and unpopular sectors could be a smart move today.

Companies that have fallen out of favour often end up seeing their stock prices sink. In a lot of cases, this downward trajectory is justified. If business conditions worsen or a new threat emerges, falling sales and profits can be a clear signal to stay away.

But sometimes, such disruptions are only temporary. And providing the underlying business has the resources and talent to navigate the storm. Downward volatility can create tremendous opportunity. So, what are some of these unpopular sectors right now?

Real estate, manufacturing, and construction seem to be strong contenders for weakest performance right now. All have seen their demand get hit hard by higher inflation and interest rates over the last few years. Yet despite economic conditions steadily improving, valuations within these sectors are still largely depressed.

A buying opportunity for patient investors?

Looking at my own portfolio, Somero Enterprises (LSE:SOM) is a prime example of a business suffering from short-term headwinds. The stock is down almost 50% since the start of 2022, and it’s not difficult to see why.

As a manufacturer and distributor of laser-guided concrete laying screed machines, Somero’s business is sensitive to the US construction industry. However, with interest rates still elevated, companies have been postponing projects until 2025, when better rates are expected to emerge.

Consequently, its latest trading update revealed that sales and earnings are likely to be lower compared to a year ago. And with shareholders understandably disappointed, the shares have slid by another 20% since the start of the year.

It’s frustrating to see earnings get disrupted. However, the reaction from shareholders suggests that most are too focused on the short-term issues. In the long run, demand for Somero still looks rock solid, especially given the trillions of dollars being poured into renewing US national infrastructure.

Pairing this with a healthy cash-rich balance sheet and a price-to-earnings ratio of just 9.3 suggests that a buying opportunity has emerged for long-term investors to consider. At least, that’s what I think, given the firm’s near 40-year track record of navigating the cyclical construction industry.

The post No savings at 40? I’d buy cheap UK shares to try and retire richer appeared first on The Motley Fool UK.

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Zaven Boyrazian has positions in Somero Enterprises. The Motley Fool UK has recommended Somero Enterprises. 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.

Motley Fool UK 2024

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