7 cheap shares that can help me easily build a second income

Some of the focus has now shifted from generating passive income to a second income. Although they are very similar, creating another income can require active management. One of the best ways I can find to make alternative money is to buy cheap stocks in the stock market. Over time, trimming the profits of this portfolio can allow me to enjoy the results.

Fly high

One area where I feel there is value in buying right now is in the aviation space. Rich stocks Wizz Air, easyJet, IAG, and others have fallen out of favor since the pandemic in 2020. Even last year because we lifted restrictions, the stock did not rise higher. For example, Wizz Air’s share price has fallen by 40% over the past year.

However, things have started to change in recent months. I recently covered it TUIwhich is noted in their recent update “Q4 customer numbers are at 93% of full-year 2019 levels”. Although TUI operates a full holiday business rather than just flights, this suggests that travel operators and airlines should return to the 100% level by 2023.

On that basis, I think the wave of positive sentiment can be very fast. In fact, I think we’re starting to see it take shape. Wizz Air shares have risen 102% in the past three months, with easyJet shares also up 43%. Even with that move, when I look at the 2019 price, I still feel this stock is cheap and I’m thinking of buying now.

Cheaper shares I would consider

Another area where I think there are good options is in finance. Some large banks and institutions have low price-to-earnings ratios. This means that the stock price is currently lower than I would expect based on the latest earnings per share. I use the benchmark if the ratio is below 10, it is a good value.

With the current P/E ratio in parentheses, I have noted it Lloyds Banking Group (6.40), abrdn (5.05) and Barclays (4.59). These are all the ideas I have for buying with free cash.

There is some lag between interest rate increases and major banks benefiting from higher net interest income. This gives me a positive outlook for the sector for 2023. I expect rates to peak in late spring/early summer at 4% (currently at 3.50%). So banks should be able to continue to increase their revenue for most of this year.

For investment managers like abrdn, I expect this year to see an inflow of clients because they appreciate more that there are some deals that can be done in the financial market.

Generate income

In the coming years, my goal is to sell some of my holdings to generate some cash. For example, suppose I put £1,000 in stock X. If the price rises to £1,200, I will sell £200 and leave the rest in the company. A risk that my poor pick and never gain in value.

When I do this through the entire portfolio, I believe I can generate a good amount of cash in the long term.