I bought 10 cheap shares. Here’s what happened next

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In the four weeks from June 29 to July 26, my wife and I jumped into stock buying. In total, we added 10 cheap stocks to our existing family portfolio. Six of these actions came from the blue-chip FTSE100 index, three mid-cap FTSE250and one from the US S&P 500 index.

We bought these shares for three reasons. First, based on their underlying fundamentals, they all seemed cheap to me. Second, they are all established companies with easy-to-understand business models. And third, after sustained price declines, all 10 stocks seemed better value to me.

What happened to our top 10 cheap stocks?

This is how our low-priced shares have performed since their purchase dates. This snapshot was taken nearing lunchtime on Wednesday morning:

Company Business Index back to date
target corporation Retailer S&P 500 16.7%
enliven Insurer FTSE100 15.7%
legal and general Insurer FTSE100 15.0%
barclays Bank FTSE100 10.6%
Direct line Insurer FTSE250 8.3%
lloyds Bank FTSE100 6.0%
itv Announcer FTSE250 2.7%
royal mail Mail FTSE250 0.9%
Khaki Builder FTSE100 -3.3%
Rio Tinto Miner FTSE100 -6.8%
Average 6.6%

Seeing these returns, a few things jump out at you. I know very well that I never get it right all the time. Still, it’s nice to see eight of these 10 new stocks posting early gains on paper. Worst performer is mega-miner Rio Tinto, whose shares have lost nearly 7% of their value in recent weeks. But that doesn’t surprise me too much as I was expecting these FTSE 100 stocks to be very volatile in 2022/23.

The biggest winner is the giant US supermarket chain. target corporation, whose shares are up a sixth so far. I was so convinced that these S&P 500 shares were way underpriced that both my wife and I bought them, which almost never happens.

Another thing that jumps out is that our financial stocks are doing quite well. Five of the top six are UK banks or insurance companies. Having worked for such companies for a period of 15 years, I believe I have a reasonable understanding of this industry and its value stocks. So far so good.

This is not a portfolio

Please note that this is a mini portfolio to add to our existing investments and assets. With only 10 stocks, it is not a suitable portfolio, which would normally contain 20 to 30 stocks at a minimum. Instead, it’s a highly concentrated mutual fund, designed to add additional dividend income to reinvest in more stocks or expenses.

In fact, the cash returns on these 10 cheap stocks range from 2.5% (for Target) to 13.5% per year (for homebuilders). Khaki). The average cash return on the 10 stocks is a tidy 7.4% a year. That’s almost 1.9 times the FTSE 100’s annual dividend yield of around 4%.

We buy these shares for the long term.

Of course, we care little how these stocks behave in their early days. As long-term investors, we try to look past current problems like red-hot inflation, skyrocketing energy bills, rising interest rates, and slowing economic growth. We bought these 10 cheap stocks to generate income for decades, and hopefully that’s what they do. Stupid fingers crossed!

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