The stock market has recovered from its March crash over the past few months. However, despite this performance, many UK shares continue to trade at depressed levels.
Now could be the perfect time to buy these stocks as research shows buying shares at depressed prices can yield high total returns over the long term. Doing so may even allow you to retire early.
Retire early with discount shares
Low-cost airline group easyJet (LSE: EZJ) saw most of its sales vanish when coronavirus lockdowns effectively banned air travel in the second quarter of this year.
The company made it through the eye of the storm, but it could be several years before air travel returns to 2019 levels, according to analysts.
This suggests the company is facing several years of sluggish growth. Nonetheless, this slow return to normality could actually be beneficial for the group.
EasyJet has a much stronger brand and balance sheet than many of its rivals. This gives the organisation a definite competitive advantage. As such, it may recover faster than its peers and take a more significant market share.
Companies with substantial competitive advantages can help investors retire early as they may generate higher returns over the long term.
The company’s latest trading update suggests the recovery is already underway,
Although the business is going to continue to face headwinds in the near term, now could be an excellent time to buy a share of easyJet as part of a diversified portfolio. The stock is still trading close to a multi-year low, which suggests it offers a wide margin of safety at current levels.
What’s more, the business has a good track record of returning excess profits to investors with dividends.
This suggests the shares may produce high total returns for investors in the years ahead as the airline industry recovers. These high returns could help investors grow their financial nest egg and possibly retire early.
Sports Direct owner Frasers Group (LSE: FRAS) may be perfectly positioned to benefit from the current economic situation. Historically, discount retailers have reported a better sales performance in a harsh economic climate as customers seek out bargains. This may result in a sales surge for Sports Direct.
If sales do jump, it could provide a significant financial return for investors looking to retire early. Investor sentiment towards Frasers Group has been weak in recent years.
A lack of growth has held back the stock’s performance. If the bottom line starts to expand, investor sentiment could improve. That may push the share price higher.
The stock is trading 40% below the level at which it began the year. This suggests it offers a wide margin of safety at current levels.
For this reason, investors looking to retire early may benefit from taking a closer look at Frasers. A return to growth could produce a sizable capital gain in the near term as well as the potential for expansion over the long run.
The post I’d buy these two cheap UK shares for an ISA to retire early appeared first on The Motley Fool UK.
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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.
Motley Fool UK 2020