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Last month, the FTSE 100 index reached an all-time high of 8,047.06 points. As I write, it stands at 7,564.68, more than 480 points (-6%) below its peak. However, many UK stocks have fallen much more than this recently. Here are five cheap stocks I already own, but would gladly buy at today’s new discount prices.
Five sliding FTSE 350 stocks
The cause of this latest market collapse originated in California and New York, where two midsize US banks failed. Both banks specialized in US tech clients and both failed due to poor risk management.
As in the old saying, “When New York sneezes, London catches cold”, this US contagion spread rapidly and hit UK stocks hard. For example, each of these five FTSE 350 Stocks have taken a beating in recent days:
| Company | Market value | share price | change of a year | five year change |
| fan | £12 billion | 428.5p | -22.0% | -37.1% |
| barclays | £23.4 billion | 148.18p | -12.8% | -27.0% |
| Direct line | £2.1 billion | 157.3p | -42.6% | -58.8% |
| legal and general | £14.4 billion | 242.89 p | -8.3% | -6.4% |
| lloyds | £31.7 billion | 47.7p | 0.0% | -28.3% |
The worst hit of these five rocky stocks is Hotline Insurance Group, which had the misfortune to post weak full-year results in Monday’s free-falling market. Worse yet, its shares have lost more than two-fifths of their value in the last 12 months. Oh.
Note that all five stocks belong to the financial sector: fanHotline and Legal and General Group are all insurers and asset managers, while barclays and Lloyds Banking Group are the major banks in the UK. Each has been hit by the fear, uncertainty and doubt that rock the American banking industry.
I see them as very cheap stocks today.
My wife bought these five shares for our family portfolio in June or July of last year. At the time, I viewed each as a bargain buy, but several of these stocks are now even more undervalued. Here’s how your value fundamentals stack up today:
| Company | P/E Ratio | earnings performance | dividend yield | dividend hedge |
| revives* | – | – | 7.2% | – |
| barclays | 5.0 | 20.1% | 4.9% | 4.1 |
| Direct line* | – | – | – | – |
| legal and general | 6.7 | 15.0% | 8.0% | 1.9 |
| lloyds | 6.6 | 15.1% | 5.0% | 3.0 |
As a veteran value/dividend/income investor, I am drawn to stocks that trade with a low price-earnings ratio and therefore high earnings yields. Barclays, L&G and Lloyds hit the spot here, and Barclays looks like an exceptional bargain.
Similarly, I also like having cheap stocks that pay me decent cash dividends while I wait for stock prices to rise. Four of these five discounted stocks meet this requirement, while Direct Line has suspended its dividend until its earnings pick up later this year.
Furthermore, the dividend coverage of these stocks ranges from 1.9 times at L&G to 4.1 times at Barclays. Then again, these are all final (historical) numbers, and analysts expect profits at financial firms to decline in 2023.
In short, I would gladly buy all five of the cheap stocks today, but I won’t. That’s because I already have them, plus I’m waiting for the new fiscal year to start on April 6 before investing any more cash!
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