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It's been a tough year for FTSE 100 shares, but as a result they look very cheap and I have high hopes for the next three positions in the portfolio.
I waited years to buy shares in a sports and leisure clothing retailer. JD Sports Fashion (LSE: JD) at a decent price. Finally, I saw my opportunity after the January profit warning.
The JD Sports share price has plummeted 42.78% in 12 months and is trading at just 7.8 times earnings. It seemed like a can't-miss buy, although I took an early hit as it's down 9.65% since I added it to my portfolio on January 22nd.
Too cheap to ignore
I jumped too soon. Experience has shown me that a profit warning is often followed by a series of consequences, and those have surprised me.
JD Sports has a strong retail offering and I think it will rebound once recession fears subside and consumers feel a little wealthier again. It has a healthy balance sheet, generates plenty of cash, and is strengthening its supply chain, systems, and stores. If I have more cash, I could reduce my position on average.
On January 30th I finally bought shares of an insurance conglomerate in Phoenix group holdings (LSE: PHNX). At the time they were earning almost 10% returns, while trading at around seven times earnings. Since the dividend looked sustainable, despite its skyrocketing level, I decided it was an obvious buy.
As with JD, I suffered some early pain. I won't complain though. I buy stocks to make money for 10 years or more, not 10 days.
I'm willing to be patient with Phoenix. In fact, I'd like to buy more, as the stock trades at six times earnings and yields a staggering 10.38%. At that rate, I'll double my money in just over seven years, even if the stock price doesn't rise at all.
Phoenix will also benefit when interest rates begin to fall and investor confidence improves, as this is expected to increase the value of the investments it holds to support its insurance obligations.
Another chance to come back
These things are difficult to predict, of course. For example, on February 1, Phoenix proudly announced that it had met its 2025 growth target two years early, with an 80% increase in net cash flows to new businesses. Instead of rising, the stock price fell. I still think it's very cheap and I just wish I could buy more shares.
I bought paper and packaging specialist. Smurfit Kappa Group (LSE: SKG) in June and late November, and until last week I was in the red on my purchases. My luck has changed. The Smurfit share price rose 10.97% last week, leaving me up 6.49% in total.
Smurfit has been hit by falling consumer demand, while plans to expand in the United States by acquiring rival WestRock generated a mixed response. Last week's full-year results looked poor at first glance, with pre-tax profit falling 18% to €1.05 million amid falling packaging demand.
However, investors chose to focus on Smurfit's improved margins, a return to growth in the fourth quarter and a higher dividend. The stock still looks like a good value at 10.51 times earnings, yielding 4.1%, and I expect it to continue to recover. Again, I would buy more if I had the funds in my trading account. Unfortunately, I have spent it all.
