Whch is the cheapest stock on Freetrade?

Investing and Markets 📈
1

Not sure if this has been asked on here before - if so please direct me - the cheapest stock i’ve seen is Llyods are there any cheaper ones?

2

SXX by a long shot…

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3

Beware of confusing cheap with a low unit price.

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4

please elaborate?

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5

Cheap in price does not necessarily equate to cheap in value.

For example (a made up one) Lloyd’s is say 50p a share. Cheap, in price. But the company it’s self may have many issues, low cash, and huge debt among other factors, that actually the shares might not really be worth 50p but might really only be worth about 45p. when you consider the business as a whole and look at its complete value in this case the 50p share is cheap in cost but expensive for what you get for your 50p.

Maybe that crude Incomplete example makes sense?

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6

Sure. It seems to be a worryingly common misunderstanding and it’s hard to explain.

You might think, for example, that Rio Tinto’s expensive at about £40 a share but it has traded nearly as high as £50 over the past year and as low as £34.

Say the price is in the low £30s, you may be getting a relative bargain even though the price is astronomically higher than Lloyds at 50p.

As another example, let’s take two ETFs that track the MSCI world index: HMWO, at £17ish a share, and SWDA, at £46ish a share. It’s tempting to think that the former’s much cheaper but it’s not. That said, just to confuse matters, the ongoing charge is a little lower at 0.15% vs 0.20%.

Hope that helps. If anyone could chime in with an easier-to-understand explanation of what I’m getting at, please feel free to do so.

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Think you covered it well tbh.

A common analogy is to think of the size of the pie :pie: (total shareholder net equity value) and not the slices of the pie (per share price):pizza: which can be cut an an innumerable amount of ways i.e. you can cut a pizza into 4, 6 or 12 slices (number of shares outstanding) but it’s doesn’t change the area/volume (total value) of pizza in total despite the pizza 1/12th slice << 1/4th slice.

Consider: Is the whole pie (market capitalisation of common shareholder’s equity) smaller (undervalued), bigger (overvalued) or equal to its fundamental intrinsic value? and is the growth on the horizon?

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