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FTSE 100 stocks had a tough week last week. Then on Monday the London Top Index fell further.
Never mind the 8,000 points the Footsie recently hit. We are now heading down near 7,500. Are we teetering towards another stock market crash? I do not think.
The main thing is not to panic. The FTSE 100 has lost around 6% since reaching its all-time high last month. And now it’s at levels last seen…in January. You know, just a couple of months ago.
That’s not a setback at all, really. And it is making a lot of cheap FTSE 100 shares look very cheap to me at the moment.
cheap bank
barclays (LSE: BARC) shares fell 6% on Monday, more than any of the other UK banks
That could be due to its exposure to the US, after the failure of two banks there. The other UK banks appear to be safer from US problems.
Barclays’ price-earnings (P/E) ratio is down to just 5.2 now. That’s well less than half the FTSE 100 average. And forecasts see it falling to around 4.5 next year. That sounds crazy cheap to me.
But there’s more. A falling price pushes up dividend yields. And analysts now put it above 6% by 2024. That’s a way out. But what counts is the bank’s long-term perspective.
Now, we could face a new banking crisis. That is always possible. But I think the chances are slim.
Sure
legal and general (LSE: LGEN) lost more than 4% on Monday. I already thought it was cheap, and now I think it’s even cheaper.
I hope some of the weakness comes from Direct line, which cut its dividend this year. The stock has plunged 40% in the past 12 months. And that has sent chills through the entire sector.
But the insurance business is built on uncertainty. And when, like now, the market has pushed stocks lower, I take advantage of that moment to buy.
We’re looking at a forward P/E of eight now. That’s not as low as Barclays, but I still see it as very cheap.
The expected dividend yield has reached 7.5%, although it has to be at risk. However, Legal & General has not cut its dividend in the last decade.
Super cheap?
Speaking of low value, how about Central (LSE: CNA) with a P/E of less than five? The owner of British Gas has seen its shares rise since 2020. But they are still down 25% in five years.
In a year of high fuel prices, why is Centrica’s stock so unloved? Investors may fear that gasoline will become cheaper again.
There is a £300m share buyback now to repay excess cash. So Centrica’s board seems to think its stock is cheap, going that route instead of a special dividend.
Oil and gas production is profitable. But the retail business is competitive and runs on slim margins. The balance between those two sides makes things less secure.
But overall, I think Centrica is cheap at the current price.
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