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Investing like Warren Buffett: 2 cheap UK shares on my Stocks and Shares ISA watchlist!

Royston Wild
·3-min read
The letters ISA (Individual Savings Account) on dice on stacks of gold coins on a white background.
The letters ISA (Individual Savings Account) on dice on stacks of gold coins on a white background.

The recent stock market rally has fanned hopes that UK share prices could be on the way back. News of a possible step forward in the hunt for a Covid-19 vaccine led to the frantic stock buying of last week. Tales of more progress in the hunt for a silver bullet would inflate risk appetite even further, as would news of a Brexit deal and a conclusive resolution to the bitter US presidential election.

It doesn’t matter to me whether or not UK shares continue to climb in the coming days and weeks. Barring some cataclysmic event I know that stock prices will bounce from their 2020 lows. History shows us that UK share values have always bounced back from significant social, economic, and political events. And as someone who invests for the long term I’m not impatient when it comes to the timing of stock market recoveries.

Thinking like Warren Buffett

Let’s not forget that the FTSE 100 doubled in the decade following the 2008 financial crisis. This is even though concerns over the health of the global banking system and a sovereign debt emergency that threatened to sink the eurozone. And this rebound from the last significant stock market crash wasn’t an isolated incident, either.

Image of person checking their shares portfolio on mobile phone and computer
Image of person checking their shares portfolio on mobile phone and computer

As billionaire investor Warren Buffett has happily gone on record to point out: “In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.”

US stock markets have already recovered strongly following the Covid-19 crash that spanned late February and late March. Indeed, the Dow has regained all of the ground it lost and is now up for 2020. There’s clearly plenty of ground for UK shares to make up, then. And I’m confident that they will sooner or later.

2 cheap UK shares on my ISA shopping list

With this in mind, here are two top FTSE 100 stocks I’m considering buying for my Stocks and Shares ISA. I think they’re too cheap to miss at today’s prices:

  • Mining giant Tharisa offers the best of both worlds to UK share investors. Platinum group metals (or PGMs) are popular safe-haven assets during periods of macroeconomic strife and low interest rates like today. This is why City analysts reckon the company’s annual profits will more or less double during this fiscal year. But PGM demand will remain robust during the eventual economic recovery, too as industrial off-take bounces back. Today Tharisa trades on a forward price-to-earnings (P/E) ratio of 3.5 times and offers a 5.5% dividend yield.

  • In my opinion QinetiQ Group is also worth serious attention at current prices. A forward P/E ratio of 13 times fails to reflect the fact that global defence budgets are rising at their fastest pace for almost 10 years. This valuation also fails to reflect this UK share’s top-tier supplier status with nations all over the globe. One final thing: QinetiQ carries a fatty 3.7% dividend yield at current prices.

The post Investing like Warren Buffett: 2 cheap UK shares on my Stocks and Shares ISA watchlist! appeared first on The Motley Fool UK.

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Royston Wild 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