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Macroeconomic headwinds such as rising inflation and interest rates have hampered markets and thrown up many cheap shares to buy and hold. One stock I’d like to take a closer look at is Currys (LSE: CURY).
Selling tech products
Currys is a household name in the UK. It sells all the technology products you might need from essentials such as washing machines, to luxury products such as televisions and cameras. It has 832 stores across eight countries and even offers support services and repairs too.
As I write, Currys shares are trading for just 50p. This puts them into penny stock territory. At this time last year, they were trading for 63p, which is a 20% drop over a 12-month period.
Cheap shares or a value trap?
Currys struggled during the pandemic period and its shares tumbled. It hasn’t recovered to pre-pandemic levels yet either. Despite that, I noticed that insiders are buying shares, as recently as last month. The chairman, a non-executive director, and chief financial officer all spent their own money buying up shares. In total they spent £150K. When insiders buy shares, I see this as a major positive. After all, who knows the direction of a business better than those helping to run it.
Next, Currys’ valuation looks cheap right now on a price-to-earnings ratio of just six.
Moving on to Currys most recent results, a full-year report for the 2022/23 period, these were a mixed bag for me. Currys overall posted a loss of £450m. Digging deeper, it made great progress in the UK segment, where it is a market leader. Unfortunately, where it is looking to grow its market share, the Nordics, it fell short. The firm said this was because competitors were pricing items at levels that it deems unsustainable for the longer term. Currys believes it can rebound here in the future.
Further negative news from the Currys update for me was the suspension of its dividend. This is a blow, but understandable based on recent results and the fact the economy is in a difficult position. Many retailers are struggling as a cost-of-living crisis has emerged in the UK. Inflation and rising costs across the world are an issue too. This means consumers have less to spend on non-essential goods.
On paper, Currys looks like one of the cheap shares I mentioned earlier. With that in mind, I’m hesitant to buy any shares for my holdings despite a low valuation and insiders buying shares. The faith of management to spend their own hard earned cash is good to see, but I want to see more tangible results in the next fiscal year before I part with my own money.
In addition to this, the company operates in a market that is changing, whereby purchasing of electrical items, like many other goods, is slowly moving online. Despite that, Currys insists it performs better from its in-store transactions compared to its online offering.
I’m going to put the shares on my watch list for now and keep an eye on developments.