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Some FTSE 100 In my opinion, stocks are can't-miss bargains right now given the recent economic volatility. However, as the index approaches the 8,000 mark and investor confidence is improving, I believe now is the time to act before prices and valuations rise.
Improving feeling or a false dawn?
The FTSE 100 index is up 6% over a 12-month period. This time last year the index stood at 7,471p and is currently trading at 7,925p.
I would have to go back to February 2023 to see the last time it surpassed the all-time high of 8,000p. Even then, he remained above this point for less than a day.
Recently released data shows that retail spending was better than expected in January and February of this year. This helped allay fears of a sustained recession and sparked murmurs of improving investor sentiment. Furthermore, considering that many economists believe we are primed for interest rate cuts sooner rather than later, as well as inflation levels falling, I am not surprised to see the FTSE 100 rising.
With this cocktail of tailwinds in the back of my mind, I can't help but wonder when stock prices will start to rise. In my opinion, now could be the perfect time to capitalize and strengthen my holdings.
One stock I'm considering the next time I have some cash to invest is British American Tobacco (LSE: BATS).
Passive Income Gem
British American Tobacco is one of the largest companies of its kind in the world, with an enviable reach of more than 180 markets and a portfolio of around 300 brands.
The shares have fallen 18% in a 12-month period from 2,885p this time last year to current levels of 2,364p.
I would love to buy British American Tobacco shares for several key reasons. Firstly, I am looking to strengthen my passive income stream and I am a Dividend Aristocrat. The company's generous investor reward policy is not worthy of contempt. Currently, a dividend yield of over 9% is very tempting. Plus, the business generates cash hand over fist, which helps support it. However, I am aware that dividends are never guaranteed.
Next, the stock looks very cheap to me with a P/E ratio of just six. For context, the FTSE 100 average is close to double that.
Finally, the firm's track record, as well as its broad profile and brand power, are enviable. All these aspects have helped the business grow, providing solid returns over a long period. Additionally, these traits help the company remain one of the most attractive options for dividend seekers. However, I understand that past performance is no guarantee of the future.
From a bearish perspective, the looming specter of smoking bans related to harmful health effects is worrying. However, it seems to me that this threat has been around for a while and the tobacco companies still seem to be making money.
Additionally, economic volatility could hurt sales numbers as consumers grapple with rising costs of food, energy and other costs of living. This could affect performance and profitability.
Overall, I think British American Tobacco is a bargain right now. I think its share price could rise as sentiment and the broader index see potential momentum in the coming months.
