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Stock market rally: 2 dirt-cheap UK shares I’d buy today and hold forever

Royston Wild
·3-min read
Image of person checking their shares portfolio on mobile phone and computer
Image of person checking their shares portfolio on mobile phone and computer

I’m not getting too excited about this week’s stock market rally. It may well be that Pfizer’s new Covid-19 vaccine proves to be the game changer in the fight against the coronavirus. But there is still huge uncertainty over how effective it will prove to be in stemming the pandemic. Any negative news flow on this front could send UK share prices sinking again.

However, there are a number of UK shares I’m super enthusiastic about and am thinking about buying before too long. Here are two ultra-cheap stocks on my radar right now:

A great UK share for growth investors

Share pickers can protect themselves from the uncertain economic landscape by buying into non-cyclical companies like defence specialists. Profits at firms like these remain stable through economic upturns and downturns. And one top UK share I have my eye on in this field is Avon Rubber (LSE: AVON).

The sale of its Milkrite Interpuls rubber dairy equipment arm this autumn allows the FTSE 250 business to concentrate solely on the production of its market-leading protective masks and body armour. These products are selling like hotcakes, and the UK share has inked a number of significant contracts with the US Department of Defense in recent times.

Avon Rubber improving business with the DoD has been boosted by to recent acquisition activity in the US. And the company remains on the hunt for more M&A targets to bolster its product ranges. Indeed, it intends to reinvest some of the proceeds from the Milkrite Interpuls sale on buying US head protection specialist Team Wendy for a cool $130m.

City analysts reckon Avon Rubber’s annual earnings will soar 30% in the current fiscal year (to September 2021). And this leaves it trading on a price-to-earnings (PEG) ratio of just 1. It’s a reading which, in my view, makes it a UK share that’s too good to miss.

A FTSE 100 firecracker

I’m also thinking of buying AstraZeneca (LSE: AZN) for my Stocks and Shares ISA today.

City boffins reckon annual earnings here will rocket 300% in 2020. And this leaves the FTSE 100 pharmaceuticals maker trading on a forward PEG ratio of 0.1. Another 24% earnings advance is forecast for next year. I’m tipping AstraZeneca to record excellent earnings growth in the coming decades as healthcare spending across the world expands.

I’m particularly excited by this UK share’s profits outlook as drugs spending in emerging markets booms. According to Krane Funds Investors, developing market countries will raise healthcare expenditure in relation to GDP by 24.4% through to 2040. This compares with an anticipated 9.8% increase among developed economies over the same period.

This bodes particularly well for AstraZeneca given the huge investment it’s made in emerging markets in recent years. It’s a strategy that helped the UK share’s sales in these far-flung territories soar 11% (at constant currencies) in the first nine months of 2020. Revenues here were particularly impressive given that sales of its asthma battler Pulmicort fell more than 40% as the Covid-19 crisis forced the closure of nebulisation rooms in China.

The post Stock market rally: 2 dirt-cheap UK shares I’d buy today and hold forever 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 recommended Avon Rubber. 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