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He FTSE 100 it still has plenty of cheap stocks to tempt investors despite the strong rally of the past three months.
The following three actions have caught my attention. I am adding them to my watchlist with an eye to buying them as soon as I have the money to spare.
These FTSE 100 stocks are not expensive
He barclays (LSE: BARC) share price is on a roll, having risen 23.64% in the past three months. However, in the longer term it is still under siege, having fallen 8.73% measured in one year. Over five years, it has dropped 11.66%.
However, Barclays still looks cheap. It has a low book price valuation of just 0.4 (a figure of one is considered fair value). Price-to-earnings valuation is also low, just five times earnings (versus 15 for fair value).
This is a difficult time for banks as they are exposed to a fall in house prices and a recession. On the plus side, higher interest rates have allowed them to widen net interest margins. That is the difference between what savers pay and what borrowers collect.
Barclays is currently yielding 3.3%, which is forecast to rise to 4.8%. With a coverage of 3.7, the dividend has more headroom for growth, making it an inexpensive dividend income stock.
i would risk it too BT group (LSE: BT.A), which is currently trading at just 6.4 times earnings. Investors have been spooked by years of underperformance, with the stock falling 32.89% in one year and 50.14% in five.
BT has been sunk by falling profits, high net debt, labor unrest and stiff competition from rivals. You must also finance heavy capital expenditures on your fiber infrastructure and mobile networks.
Another highly valued income stock
However, if you still pay an attractive return of 6%, covered 2.7 times by profit. BT faces challenges, but for a long-term, anti-buy-and-hold investor like me, the risks are worth taking. I will reinvest my dividends to increase my holding while I wait for it to recover.
Hindsight is a wonderful thing. He should have bought a supermarket chain. Sainsbury’s (LSE: SBRY) three months ago as it is up 30.63% since then. However, for one year, the stock price is still down 14.3% and 2.36% for five years. So arguably it’s still cheap.
The grocery sector is tough right now as supermarkets are forced to cut prices due to the cost of living crisis. All the while, Aldi and Lidl keep eating their market share.
The connection with Argos did not give the expected result, and now the management is doing its best in the delivery service Just Eat. Sainsbury’s showed it still has bite with a record Christmas, with full-year pre-tax profit now expected to hit the top end of its forecast range of £630m to £690m.
That makes his current valuation of 9.9 times look even better. The big attraction is the dividend. Sainsbury’s is currently yielding 5.2%, covered 1.9 times by earnings. That’s more than any cash account would pay me.
Buying stocks cheap is always risky, but I’m investing for the long term and February seems like a good time to get stuck.
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