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I love buying cheap stocks and there are some amazing ones out there. FTSE 100 Index There are a lot of deals out there right now, especially these three.
Last Sunday (August 4), I realized that the blood pressure (LSE:BP) share price was at a 52-week low and I said it looked like… “Deal of the year!”
Great value?
The oil giant's shares have since fallen another 2.48%, down 10.57% in 12 months and trading at just 6.26 times earnings. Better yet, their yield is 5.18%.
Its profits and share price soared during the energy crisis, but when oil prices fell, they halved in fiscal 2023, from $27.2 billion to $13.8 billion.
BP continued to reward long-term shareholders, raising its dividend by 10% and buying back $7.9 billion of shares. Its net debt, at £20.9 billion, is at its lowest level in ten years.
Now that Brent crude is below $80 a barrel, investors still don't want to know. Others are cautious as BP doubles down on fossil fuels, despite its push for carbon neutrality. Energy stocks are cyclical, and I think the time to buy BP stock is when it's down, not when it's up. Global warming poses risks, but I'll buy BP stock when I have the cash.
Speaking about climate change, in July I mentioned the insurer Lloyds of London Beazley (LSE: BEZ). As a specialty risk insurance and reinsurance company, it will pay the costs of tomorrow's floods, storms and hurricanes.
That partly explains why the stock price is so cheap, trading at just 4.47 times trailing earnings, even though its shares are up 35.27% in 12 months, boosted by a 155% jump in pre-tax profit in 2023 to a record $1.25 billion.
The strong form continues, with half-year results released on 8 August showing a record pre-tax profit of $728.9m, almost double last year's $366.4m. Beazley was last week's best-performing company in the FTSE 100 index, up 12.53%.
NatWest Group is back
Its 1.96% yield is on the low end, but that's partly due to the booming share price. Another one I'll buy when I have the cash.
NatWest Group (LSE: NWG) is also on a roll. Its shares are the second best performers in the FTSE 100 over the past six months, up 58.4%. Darktrace is the only one that has risen faster, by 68.2%. In twelve months, NatWest has risen by 38.85%.
The big banks are finally living up to their potential and NatWest's share price is leading the way. However, it remains surprisingly cheap, trading at 6.67 times earnings. The yield is also attractive, at 5.11%.
Labour's decision to abandon plans to sell the government's remaining stake in NatWest has boosted shares as there will be no cut-price stocks flooding the market.
Berenberg analysts have raised their target price to 415p. NatWest shares are currently trading at 334p, so there is a potential upside of 25%.
However, it's not all rosy days. First-half profits fell 15.6% to £3.03bn, while net interest margins fell 16 basis points to 2.07%. Margins may shrink further when interest rates are cut. Even so, I would still be buying NatWest at the current low valuation, had I not already bet on the banking sector through Lloyds Banking Group.
