Best cheap UK stocks to buy in November 2022

What are the best cheap stocks to buy in November? We look at some of the best options available to investors this month.

The UK is facing turbulent times with the cost of living crisis, a looming recession and the recent economic crisis instigated in part by former chancellor Kwasi Kwarteng’s mini budget and the devaluation of the pound. Other issues, including the cost of living crisis, spiralling energy bills and the war in the Ukraine also continue to inject uncertainty into the financial markets, as well as two changes of prime minister and chancellor in the UK.

As such, it’s worth bearing in mind that the market is likely to remain volatile over the next few months. However, here are some of the shares we think look attractive right now over the longer term

M&G looks oversold

Shares in pensions and investments specialist M&G recently dipped by 17% following former chancellor Kwasi Kwarteng’s poorly received mini budget. Investors feared that pension funds would experience liquidity problems because of the devaluation of the pound and long-term interest rate increases.

However, analysts at broker UBS said they do not expect blue chip life assurers, such as M&G and Aviva, to experience serious solvency ratio problems and that any issues are likely to be minor. The shares have since recovered some ground to 178.5p but are still down 10% for the year.

M&G posted relatively robust full-year results for 2021, with adjusted operating profits before tax of £721 million – although this was down on the previous year’s figure of £788 million in 2020. This reduction was due to changes to longevity assumptions and subsequent lower benefits. Meanwhile, assets under management increased by 0.8% to £370 billion and the company unveiled a share buyback scheme worth £500 million.

The asset manager saw net client inflows of £1.2 billion and operating capital generation increased by 40% on the previous year. Meanwhile, the shareholder Solvency II ratio came in at 214%.

M&G has set a target to deliver operating capital of £2.5 billion to the end of 2024. It also pays a decent dividend for income seekers, with a current yield of 10%.

Analysts at brokers Deutsche Bank Aktiengesellschaft recently trimmed their price target on the shares from 230p to 200p. However, this still leaves plenty of upside potential.

Tesco – well positioned in tough times

It’s not an easy time for the retailing sector. Shares in the supermarket chain are down 22% this year to 210p on concerns about inflationary cost pressures and the cost of living crisis. Indeed, Tesco shares recently hit a six-year low of 199p following the half-year results earlier in October. However, this may be a buying opportunity.

While recent pre-tax profits were down by 64% for the half-year to £413 million, this was due to a non-cash impairment charge - a £626 million charge relating to Tesco’s retail property estate.

And while things may be tough in the short term, the grocery giant is better placed to withstand the difficulties in the retail sector than some of its peers. Its discount ranges, Aldi price match and Clubcard prices appeal to shoppers trying to save cash.

Half-year revenues rose 6.7% to £32.5 billion, thanks to strong fuel sales, while like-for-like retail sales increased by 3.2%. Its online sales remain 50% above pre-Covid levels and sales of its Finest ranges are up 13% as shoppers look to save money by eating in.

That said, the company expects a difficult year ahead, with profits set to come in at the lower end of expectations. Tesco now anticipates retail adjusted operating profits of between £2.4 billion and £2.5 billion for the full-year. However, cash flow is set to remain strong, forecast to be at least £1.8 billion. Net debt is down and the company has also made cost savings of £500 million this year, as well as returning £450 million to investors.

Analysts at broker Barclays recently cut their price target on Tesco shares from 325p, however they still think the shares could reach 310p. While things could get choppy in the short-term, as such, they are a long-term buy.

IAG – ripe for recovery?

After a tough few years in the airline industry, some kind of normality is beginning to return to the sector. At 113p, shares in International Consolidated Airlines, owner of Aer Lingus, British Airways, Vueling and Iberia, are down 27% this year. After high hopes of a recovery in the industry following the Covid lockdowns, airlines and customers faced capacity issues and flight cancellations over the summer season.

However, IAG’s recent third-quarter trading update was upbeat. The company said that trading during the period was better than anticipated due to passenger revenue strength. Management now expects operating profit before exceptional items to come in at around €1.2 billion – much higher than previous analyst forecasts. Forward bookings are also “at expected levels... with no indication of weakness.”

The airline firm returned to profit in the second-quarter, boosted by strong passenger numbers, posting pre-tax profits of €133 million for the second-quarter compared with a loss of €981 million last year. Half-year losses were trimmed to €654 million from €2 billion in the same period in 2021.

In Q2, passenger capacity levels came in at 78% of 2019 figures. According to figures from the International Air Transport Association, international air traffic has more than tripled compared to last year.

Inflationary cost pressures remain a concern, however. Fuel prices are high and rising wage costs are also an issue. IAG recently managed to avoid a strike by BA pilots. It also carries €11 billion of debt on its balance sheet.

Analysts at broker Sanford C Bernstein currently have a price target of 180p on the shares. IAG announces its third-quarter results on 28th October.

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