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He FTSE 100 has had a strong year. However, I still see a lot of value in UK stocks at the moment.
While this year has produced periods of volatility, that is inevitable in the stock market. Looking at the bigger picture, I think UK stocks could be set to soar in the coming years.
The FTSE 100 currently has an average price-to-earnings (P/E) ratio of 11. That's lower than its historical average of between 14 and 15.
I especially like the look of these two. If I had the cash, I would add them to my portfolio today.
JD Sports Fashion
First is JD Sports Fashion (LSE: JD.). His actions have disappointed this year. They are down 3.7%. That said, the stock is up 16.2% in the last six months and 14.3% in the last month. After a bad start to the year, it is gaining good momentum.
Even despite that increase, I still think the stock looks like good value for money. It trades with a P/E ratio of 14.8. That's considerably less than its historical average of 23.
Its share price had a poor start to the year due to difficult trading conditions. Sales had seen a significant drop and as a result, the company issued a profit warning. Frightened investors rushed to dump their shares. In the coming months, this will continue to be a threat to the company as consumers find their spending habits and business conditions remain difficult.
Beyond that, though, I think JD Sports Fashion could thrive in the long term. For starters, interest rate cuts should lead to a rebound in spending. Additionally, the company has made solid progress in its expansion plans. It aims to open 200 stores this year and has also begun to focus more on international expansion. As part of this, it recently acquired US company Hibbett earlier this year, which has more than 1,100 stores across the pond.
NatWest
Unlike JD Sports Fashion, NatWest (LSE: NWG) has had a brilliant year. The stock has been on the rise. So far this year, it has increased 55.9%.
That blows the FTSE 100's return out of the water. However, even after rising, I think its shares still look cheap.
They are now trading with a P/E of 7.1. In my opinion, for a business of NatWest's quality, it seems very cheap. Its Forward P/E is 7.8.
I also like NatWest for the passive income it offers. Its dividend yield stands at 5%, more than doubled by profits. Last year the bank increased its payout by 26% to 17 pence per share.
I've also been impressed with their performance as of late. Second quarter profit rose more than 25% to £1.3bn. In its latest update, NatWest also announced that it had acquired a portfolio of prime UK residential mortgages from Metro Bank for 2.5 billion pounds.
The biggest threat I see for the company is falling interest rates. While they will improve investor confidence, they will reduce NatWest's margins, hitting its profits.
But with momentum on its side, as well as its low valuation, I like the look of NatWest.
