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Make a million! I’m following Warren Buffett and buying these cheap UK shares in my ISA

Royston Wild
·3-min read
close-up photo of investor Warren Buffett
close-up photo of investor Warren Buffett

Want to invest in UK shares but are too nervous to buy? Well you’re not alone. The FTSE 100 and FTSE 250 remain a long way off the heights they reached before the stock market crash of early 2020. It’s possible they’ll continue to struggle as the Covid-19 crisis rolls on and on too.

This is a considerable shame, in my opinion. Why? There are simply too many top quality UK shares trading far too cheaply for investors not to go shopping right now. Many of us are missing an excellent opportunity to get stinking rich by buying stocks at current rock-bottom prices and then watching them soar in value during the inevitable economic recovery.

Making millions with UK shares

You have to be in it to win it, as they say. Those who’ve mothballed any ideas of buying UK shares have therefore greatly reduced their chances of making a lot of money. History shows us that long-term investors — those who own shares for a decade or more — enjoy an average annual return of 8-10%.

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

Clearly stock market crashes are no barrier to you and I making chunky returns then. And by buying cheap, quality UK shares after crashes like the one of recent months, we’ve a chance to hit the upper end of that range, or possibly even exceed it. It’s how hundreds of Stocks and Shares ISA investors made millions following the 2008/2009 financial crisis.

It’s worth listening to experts, like investment guru Warren Buffett in times like this. He famously suggested that we should “be fearful when others are greedy and greedy when others are fearful.” The so-called ‘Oracle of Omaha’ has used this strategy to help make billions with his Berkshire Hathaway investment firm. If it’s good enough for him, it’s good enough for me.

Two FTSE 100 titans on my radar

This is why I’ve continued to buy UK shares in my Stocks and Shares ISA despite the uncertain economic outlook. And here’s a couple more on my watchlist right now:

  • GlaxoSmithKline’s 20% share price decline in 2020 certainly merits serious attention today. Why? It leaves the FTSE 100 pharmaceuticals giant dealing on a dirt-cheap forward price-to-earnings (P/E) ratio around 12 times. What’s more, at current prices, Glaxo boasts a mighty 5.5% dividend yield. I’d buy it today and hold it for the long term as exploding global demand for drugs — and particularly so in developing regions — will drive profits here for years to come.

  • Prudential is another too-cheap-to-miss FTSE 100 stock I’m considering loading up on today. This UK share doesn’t offer a mighty dividend yield like Glaxo. But a P/E ratio of 9 times for 2020 sits at the ‘bargain basement’ end of things. I already own Prudential and I’m tempted to buy more. Certainly following its 21% share price crash this year as the long-term outlook for life insurance products in emerging markets remains white hot.

The post Make a million! I’m following Warren Buffett and buying these cheap UK shares in my ISA appeared first on The Motley Fool UK.

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Royston Wild owns shares of Prudential. The Motley Fool UK has recommended GlaxoSmithKline and Prudential. 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