Avoiding cheap UK shares in favour of gold and Bitcoin may seem to be a logical approach for any investor seeking to make a million. Gold and Bitcoin have risen significantly over recent months, while indexes such as the FTSE 100 and FTSE 250 have lagged their performances.
However, the track record of the stock market suggests a long-term recovery is very likely. Therefore, buying undervalued stocks today and holding them over the coming years may substantially increase your chances of becoming an ISA millionaire.
With that in mind, here are two cheap UK shares that could be worth buying today due to their potential to produce high returns in the long run. They could increase your chances of building a £1m ISA.
Recovery potential relative to UK shares
While many UK shares have delivered disappointing performances of late, Imperial Brands’ (LSE: IMB) 57% share price fall over the past five years is relatively poor.
Despite this, the company’s most recent results showed it continues to produce rising revenue. For example, its sales in the first half of the year increased by 2%, with a growing market share in tobacco products boosting its financial performance. Alongside cost reductions, this suggests the profit potential for the business could improve over the medium term.
Clearly, tobacco volumes are likely to come under further pressure as consumer trends change. Furthermore, asset impairments caused a severe decline in the company’s profitability in its most recent update.
However, with Imperial having strong brands that offer pricing power, as well as scope to invest in next-generation products such as e-cigarettes, it could deliver a relatively robust financial performance in an uncertain economic period.
As with many UK shares, Imperial Brands has reduced its dividend. However, it continues to offer a relatively attractive dividend yield of 10%. As such, it may yet experience further challenges in the short run, but could deliver a relatively impressive total return in the long run.
Online retail growth prospects
The Morrisons (LSE: MRW) stock price has outperformed many UK shares over recent months. It’s down 8% since the start of the year, which is ahead of the FTSE 100’s 20% decline in 2020.
The company’s most recent update highlighted the rise in demand since the start of the coronavirus pandemic. For example, in the first quarter, its like-for-like (LFL) sales increased by 5.7%. This trend may persist over the coming months – especially with the popularity of online shopping likely to rise.
Morrisons has invested heavily in its online offering, which could position the business for long-term growth as the gradual shift from in-store to e-commerce continues. Its balance sheet strength suggests it has the financial position to maintain a high degree of investment in its online services. It should also help it overcome what could prove to be a period of higher costs as it adapts to a changing retail environment.
Therefore, now could be the right time to add the stock to a portfolio of UK shares. Over time, they could boost your chances of becoming an ISA millionaire.
The post Forget gold and Bitcoin. I’d buy these 2 cheap UK shares today to become an ISA millionaire appeared first on The Motley Fool UK.
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Peter Stephens owns shares of Imperial Brands and Morrisons. The Motley Fool UK has recommended Imperial Brands. 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