3 cheap stocks to buy in February

When it comes to investing, one of Warren Buffett’s most famous quotes comes to mind – “Buy low, sell high”. With that in mind, here are three relatively cheap UK stocks that I picked up at a bargain price.

1.easyJet

After initially underperforming its peers in 2022, easyJet (LSE:EZJ) is now the FTSE‘s highest flyer this year with a whopping 45%. This is due to the excellent Q1 update that took the stock above £5 as it now expects to turn a profit this year.

To make it even sweeter, the total number of seats hasn’t even reached pre-pandemic levels. Additionally, appointment bookings remain strong, meaning easyJet still has plenty of growth potential to capitalize on. In addition, with the more fuel-efficient aircraft on order and the rapid growth of the company’s Holidays division, there is also room for margin expansion.

These factors have caused several brokers to upgrade their ratings on the stock. With that, the UK stock now has an average price target of £4.58. While that’s lower than the current share price of £4.90, which may indicate an expensive buy, it’s worth noting that easyJet’s current and future valuation multiples remain relatively cheap.

2. Marks and Spencer

Up an impressive 15% this year, Marks and Spencer (LSE:MKS) is also on my list. As in the case of easyJet, the British retailer shared the joy of its investors last month, announcing an excellent Christmas update.

Aside from a much healthier growth than tesco And Sainsbury’s, M&S also recorded record sales in the Christmas business. As a result, CEO Stuart Manchin reported market share gains in both the grocery and apparel businesses.

Nevertheless, higher energy and labor costs are likely to weigh on the company’s earnings in the short term. I’m invested for the long term, however, and the future certainly looks bright for the long-forgotten business.

The story goes on

Management has decided to accelerate its store rotation program, which has proven to be much more efficient in increasing sales and margins. Additionally, M&S’s financials are slowly improving, as are analysts’ price targets. And with cheap valuation multiples, I’ll gobble up as many stocks as possible in February.

3.Burberry

Unlike the other two UK stocks I’ve listed, Burberry (LSE:BRBY) released a so-so update in January. Still, guidance was enough to propel the stock higher, ending the month up nearly 20%.

With the group deriving the majority of its revenue from China, last year’s revenue was significantly impacted by the country’s strict zero-Covid policy. However, the recent reopening, high household savings and an increasingly affluent middle class in China provide strong tailwinds for the designer.

This represents a tremendous long-term investment opportunity for me as Burberry plans to expand its margins and market share in China in the medium term.

These catalysts have boosted sentiment around the stock. So it’s no surprise that it’s trading at a higher P/E ratio of 22. But despite the UK stock’s pricier multiples, it’s still cheaper than its French peers. The Oracle of Omaha once said, “Price is what you pay, value is what you get.”and that’s what i feel like i get with burberry.

The UK Stocks: 3 Cheap Stocks to Buy in February post appeared first on The Motley Fool UK.

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John Choong has positions in Burberry Group Plc, Marks And Spencer Group Plc and easyJet Plc. The Motley Fool UK has recommended Burberry Group Plc. The views on the companies mentioned in this article are those of the author 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 variety of insights makes us better investors.

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