Last-minute ISA ideas for investors looking to ‘buy low’

With just a few days before the 5 April deadline to fill up your ISA before the new tax year begins, savvy investors may be looking at out-of-favour stock markets to implement this strategy.

One way of identifying “cheap” markets is to look at the price/earnings ratio. The PE ratio measures how much investors are paying for shares relative to profits generated by a company or stock market index. A “forward” PE ratio uses a 12-month forecast for profits as its earnings figure.

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A low ratio means a lower cost per unit of profit but could also indicate a market where expected earnings growth is low.

On this measure, the cheapest markets, according to data from Morningstar as of 26 March, are Brazil (7.3 PE), FTSE Small Cap (10.48), FTSE 250 (11.89) and MSCI China (12.18).

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On the other hand, US shares trade on a lofty 22 times earnings and India 18.3 times.

Value investors look to “mean reversion” to justify buying cheap shares. They argue that over the long run, valuations correct and trade at their normal levels, so cheap shares go up and expensive shares fall.

With that in mind, these are three markets that could look appeal to value hunters.

UK smaller companies

UK smaller companies stand out as particularly good value for investors right now.

In fact, Abby Glennie, manager of abrdn UK Smaller Companies Growth trust, says the sector could be the most undervalued in the world relative to 10-year valuations.

Glennie says: “The 12-month forward PE ratio across major small and large-cap indices shows that UK smaller companies are currently trading at a discount of -23.4% to their 10-year average (data up to 31 January 2025). This is the widest of any major region.”

Glennie also finds that European small caps were second cheapest by historic standards (-19.8%) followed by Chinese large caps (-11.5%) and Japanese small caps (-8.8%).

The UK and Japan are the only markets where both small caps and large caps have 12-month forward PE ratios that are below their 10-year average, she adds.

This is despite the fact that UK smaller companies are forecast to grow their earnings by 10% over the next year, according to fund manager Aberdeen.

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The companies in Aberdeen’s UK Smaller Companies Fund are forecast to grow their earnings by 19% on average over the same period, while the FTSE 100 (an index of the UK’s largest companies) is only forecast to increase earnings by 4%.

Glennie says: “These discounts reflect the negative sentiment that we’ve seen towards UK smaller companies in recent times. True, it’s been a tough period for the sector – with weaker performance and tightening regulation. But ultimately negative sentiment is just that – sentiment. When you look at the fundamentals, there are many brilliant smaller companies in the UK that are outperforming global and much larger rivals in terms of earnings growth.”

Another way of accessing UK smaller companies is via the WS Amati UK Listed Smaller Companies fund, which is one of ii’s Super 60 investment ideas picked by our experts.

For global smaller companies, abrdn Global Smaller Companies is a Super 60 member, as is Vanguard Global Small Cap Index.

Emerging markets

Vanguard forecasts that over the next decade emerging market shares could return between 5.6% and 7.6% a year. This lags only its expected returns for developed international, but excluding US, shares, at between 7.5% and 9.5%.

The two giant emerging markets – India and China – could offer attractive entry points for investors, but for different reasons.

On the one hand, India’s stock market is relatively expensive, with a PE of 18.3 times. But on the other, it has dropped around 10% so far this year, making it one of the worst places to be invested.

Aberdeen finds that large Indian shares are about 9% more expensive than their 10-year average and smaller Indian shares are now 9% cheaper.

India is a “compounding story”, according to GS India Equity manager Hiren Dasnai. This fund is a member of our Super 60 list.

Dasnai says: “Today, India is at about $2,500 (£1,940) per capita income. And over the last 20 years or so, the real GDP has grown at about 6% annualised. And when you look at annualised growth of about 6% real and 10% to 11% nominal, over time, it becomes a great compounding return story.”

His view is that growth can continue for the Indian economy: “China is at $10,000 per capita income. India is at $2,500, and obviously developed markets like the United States and Europe would be in excess of $40,000 or $50,000. So, there is a long runway to go. It’s a very young demographic. It’s a domestic consumption and infrastructure-driven story, and the growth is relatively less correlated. So, all these reasons make India a very compelling investment opportunity in my view,” Dasnai says.

On valuation, he notes that the multiple of Indian shares today are now roughly in line with the 10-year average.

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“If you look at the relative valuation premium of India, it is still trading at a premium to the rest of the emerging market, but the relative premium is now back to the last five-year or 10-year average, or even below on some of the metrics. So, India will always trade at a premium because of the longer runway for growth and less volatile growth. But compared to its own history, valuations did get stretched to some extent last year, and over the last six months, we have seen healthy correction in the valuation,” he said.

China is cheap compared to India but has been one of the top markets so far this year, rising more than 20%.

Gabriel Sacks, manager of abrdn Asia Focus, says that while Asia and other emerging markets may face challenges due to Donald Trump’s policies, tariffs, and interest rates, attractive valuations could reward investors.

“We remain positive on Asia, expecting that China may adopt more aggressive stimulus policies to mitigate the tariff impact,” he said. “At the Two Sessions parliamentary meeting held in early March 2025, the Chinese leadership reiterated their pro-growth policy agenda with a particular focus on stimulating household consumption, which should help unlock excess savings accumulated during the pandemic.”

Fidelity China Special Situations and HSBC MSCI China ETF are Super 60 members, allowing investors to own Chinese shares via London Stock Exchange-listed investment funds.

Are US shares now cheap?

One of the worst-performing markets this year is the US and, because it makes up two-thirds of a typical global index, it has dragged down global shares too. The S&P 500 is teetering on “correction” territory, which is a 10% drop from its highs.

But does that mean shares are now “cheap”? Not quite. Data provider Factset puts the forward PE ratio of the S&P 500 at 20.5, just ahead of the five-year average of 19.9 times and 10-year average of 18.3 times.

But Bank of America says that while the S&P 500 is historically expensive, it has earned its higher valuation by being full of better companies.

It says: “On almost any valuation metric, the S&P 500 trades at statistically expensive levels vs history. But the S&P 500 is a different animal than in prior cycles. In the 1970s and 1980s, the index was dominated by asset-intensive manufacturing companies. Today, 50% of the index is labour-light and asset-light, like tech, media and healthcare.”

We recommend the SPDR S&P 500 Ucits ETF to track US shares, as the fees are just 0.03%. For an active manager, investors could look at Neuberger Berman US Multi-Cap Opportunities, which owns both small and large companies.