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I think he FTSE 100 and the FTSE 250 They are great places for value investors to look for stocks to buy. And there are a couple that I've been watching for a while.
In both cases, things have suddenly become much more interesting than before. So I think it's worth examining both more closely.
Vistry
One of the interesting things about profit warnings is that there never seems to be just one of them. And on Friday (November 8) Vistry (LSE:VTY) published a second one to accompany the October one.
Shares fell 20% when the company announced that the cost errors that caused a 35% drop last month were worse than expected. The new estimate assumes an error of £165 million, instead of £115.
That's not good at all, but there were some very positive signs for investors. One is that the company conducted an independent investigation and found that the problems were limited to one division.
The other is that Vistry continues to maintain its capital return policy. That means £1 billion returned to shareholders through a combination of dividends and share buybacks over the medium term.
If it can achieve this, the stock looks like incredible value. The FTSE 100 housebuilder has a market capitalization of £2.35bn, meaning shareholders could receive a 42% return.
UK housebuilders are under review by the Competition and Markets Authority. And while I thought that made them too risky, the latest drop could make Vistry too cheap to ignore.
dr martens
I sold my shares in dr martens (LSE:DOCS) when it seemed that the company was going to go private. But I'm seriously thinking about buying them again.
The stock has performed horribly since joining the FTSE 250 in 2021. But I think a positive outlook for the US economy could mean things are about to look up for the business.
One of the reasons – although not the only one – why the business has had difficulties is the weak demand in the United States. Revenues have fallen in the region, dragging down total sales.
However, the change in government has investors predicting economic growth in the short term. And if that materializes, it could reverse some of the pressure on Dr. Martens.
Obviously, the possibility of higher tariffs is a big risk that inventors should not ignore. There is a real possibility that this could curb any increase in demand for UK-made boots.
With a forward price-to-earnings (P/E) ratio of 20, the stock doesn't look very cheap. But I think this could change quickly if US economic growth strengthens.
Value traps
Sometimes a falling stock can be a value trap when the underlying business has an ongoing problem. But I don't think this is the case with either Vistry or Dr. Martens.
In both cases, I believe the problems companies face will prove to be temporary. Investors may have to wait, but I expect both stocks to do well from here.
Right now I prefer Vistry – if the company has its problems under control, the stock looks like an exceptional value. But as someone looking for stocks to buy, I'm considering both.
