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Economic volatility has affected many FTSE 100 Index Shares have been on a tear recently. The good news for investors like me is that there are now plenty of blue-chip stocks in the main UK index trading at a discount.
Two selections I am considering are Chartered standard (LSE: STAN) and Barratt Developments (LSE: BDEV).
I would love to buy some shares of both options next time I have funds available, before they go up. Here's why.
Chartered standard
Many financial services stocks have had a tough time of late due to global volatility, including runaway inflation. Geopolitical issues have not helped either.
Asia-focused banks like Standard Chartered have also suffered due to economic problems in China, one of the world's largest economies. This is one of the biggest risks I have to consider as I am bullish on stocks. Lower-than-expected growth in the country has hit many industries hard and could hurt Standard Chartered's earnings and returns going forward.
However, from a long-term perspective, there is a pretty compelling investment case for me. For starters, the stock looks very cheap to me when you look at two key metrics. The stock is trading on a price-to-earnings ratio of just over six. If you look at the price-to-book (P/B) ratio, a reading of 0.6 suggests value, as can readings below one.
Valuation aside, the stock currently offers a dividend yield of around 3%. While I am aware that dividends are never guaranteed, the possibility of earning passive income sweetens the investment.
Finally, I am most excited about Standard Chartered's growth potential. With its established presence in Asia and the possibility of its services being in high demand due to rising populations and personal wealth, there are positive signs ahead. Standard Chartered's earnings and returns could soar. Furthermore, I believe the stock will also rise, which will also lead to capital growth.
Barratt Developments
Like financial services, the real estate market has also been in crisis due to high inflation, high interest rates and the cost of living crisis. Due to these problems, construction completions, sales and margins have come under pressure.
From a bearish perspective, persistent inflation could be a risk to the earnings and returns of Barratt and other construction companies going forward. This is because the Bank of England might not cut interest rates, which could encourage new buyers and stimulate the broader market. I will keep an eye on this going forward.
From a bullish perspective, demand for housing is outstripping supply in the UK. As the population is increasing rapidly, this demand will need to be met, offering Barratt the opportunity to increase its revenue and profitability over the coming years.
Furthermore, it is hard to ignore Barratt’s market position as the UK’s largest residential property developer. It has the presence, expertise and track record to capitalise on the positive sentiment.
Finally, the stock looks cheap to me. Using a different metric here, Barratt shares trade on a price-to-earnings (PEG) ratio of 0.7. Similar to the price-to-book ratio, a reading below one indicates good value for money. Plus, a sizeable dividend yield of close to 6% sweetens the investment. I also think this will increase over time.
