The FTSE 100 is hitting highs but these green chips still look cheap to me!
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The good thing about individual shopping FTSE 100 stocks instead of tracking an indicator that there are always opportunities out there. The blue-chip index may have hit another all-time high of 10,124.6 on Friday (January 8), but not all stocks are moving.
Instead of chasing momentum, many investors prefer to target undervalued stocks, hoping to benefit when they return to good fortune. I am one of them. And despite the blockbuster performance of the FTSE 100, I can still see many bargains.
Sainsbury’s shares fell last week
Even though the index rose another 0.8% on Friday, more than 20 stocks fell. The biggest faller was the supermarket Places to stay in Sainsbury (LSE: SBRY), which is down 5.29% on the day.
Investors were not impressed with its Christmas trading update, although it posted a 5% rise in grocery sales in the six weeks to 3 January.
Investors pulled back as cash-strapped shoppers spent less on the Argos subsidiary. Sainsbury’s looks cheap as a result, with its price-to-earnings (P/E) ratio down to 13.5, comfortably below the FTSE 100 average of around 20. The trailing dividend yield is 4.4%, so there is income on offer and potential for share price appreciation, and forecasts suggest it could reach 6.2% next year.
As always, there are risks. If the economy stagnates and unemployment rises, profits may come under pressure. But for long-term investors, this could be a buying opportunity to consider. I see a lot out there.
The king of coaches JD Sports it has a P/E of just 6.8, although I would urge caution here. It has suffered two poor Christmases in a row, and with consumers struggling in general, it may be headed for another disappointment. JD’s price dropped last week after that Bank of America discount sporting goods retailers. I’m long on this stock but I can wait another year or two (or three) for the recovery story to play out.
Irrelevant stock opportunities?
Could easyJet’s budget airline finally take off this year? It certainly looks cheap with a P/E of 7.6, as does the competitor International Consolidated Airlines Groupwho own British Airways. IAG shares are up 35% year-to-date and 180% over two, yet still trade on a P/E of just 8.8.
The decline in oil prices has slowed A shellanother tangible profit with a P/E of 9.4, while the energy group Centrica you live at 9.5. That’s bargain-basement territory, though investors should grasp why the shares are so cheap. Oil may struggle this year as well
BT Group looks interesting at a P/E of just 9.6. I have been building a large position in the dark horse of the FTSE 100 Bunzlits shares have fallen 35% in the past year, reducing its P/E to 10.7. I think it still has great potential to come back, but like JD Sports, patience is required. A house builder Berkeley Group Holdings share pricewith a P/E of 10.8, and Marks and Spencer Group in 11.1, they had a place to make up for the lost space.
Then there is the paper and packaging group Mondi and a logistics firm Global Security Groupboth at P/Es of 12.8 and offering a yield of over 6%.
The FTSE 100 is flying, but there are still potential deals. Just remember that there is more to a good investment than a low price.
