As the FTSE falls I can see cheap stocks everywhere – time to go shopping!
I love to buy cheap stocks and with global stock markets sliding now looks like a good time to go bargain hunting.
Putting it simply, shares are cheaper. If itâs a dividend payer, the yield rises too because the entry price is lower. Buying the dip also reduces the risk of piling into a stock whose price is inflated by frothy sentiment rather than solid fundamentals.
Itâs never as simple as grabbing anything off the racks though. A bargain only makes sense if itâs something worth owning in the first place. Quality comes first, not the sticker price. If a company is sinking due to its own mistakes rather than wider market jitters, that brings a whole new layer of risk.
The FTSE 100 is falling!
Media giant WPP is a case in point. Its share price has collapsed 60% over the last year as advertising budgets dry up and clients walk away. WPP looks dirt-cheap with a price-to-earnings ratio of around 6.2, well below the FTSE 100 average of roughly 17, but cheap doesnât always mean good value.
I think GSK looks more promising. The pharmaceutical giant already appeared attractively priced before this sell-off and looks even better value today with a P/E of 11.2 and yield of 3.45%. Hikma Pharmaceuticals may also be worth a look.
It trades on a P/E of just 9.4 and yields around 3.95%. The Hikma share price has slumped 12% in the last month, although not only because of the market rout. The board cut margin and revenue forecasts on 6 November as global supply chain problems delayed output at its new Bedford facility. Even so, the long-term prospects look solid.
Great bargain shares
Trainer retailer JD Sports Fashion now trades on a rock-bottom P/E of 6.2 as shoppers in the US and Europe tighten their belts. Budget carrier EasyJet looks cheap too with a P/E around 7.4. Both have been struggling for some time, but the latest sell-off has made them even more affordable for those prepared to wait for consumers to feel flush again.
One of my favourite growth stocks is International Consolidated Airlines Group (LSE: IAG). Its shares are down around 5% over the last month, although they’re still up 50% over the year as the recovery from the pandemic continues.
Airlines are sensitive to shocks, as everything from weaker consumer confidence to wars, natural disasters, and rising fuel costs can hit revenues.
The group warned of âsome softnessâ in the North American market in its 7 November update, when Q3 operating profit edged up just 2% to â¬2.05bn. That’s short of analyst forecasts of â¬2.19bn. There may be more volatility ahead, especially given growing concern about a US recession, but I still think this is one investors might consider buying with a long-term view.
Buying after a broader market dip isnât a guaranteed win. Right now, nobody knows if the current sell-off will accelerate or do a sharp reverse. As a result, I’ll spread my own purchases across the next few weeks, taking advantage of further dips, while accepting I’ll never call the exact bottom of the market. With many FTSE 100 shares looking cheap, there’s no point hanging around.
The post As the FTSE falls I can see cheap stocks everywhere â time to go shopping! appeared first on The Motley Fool UK.
Should you invest £1,000 in International Consolidated Airlines Group, S.A. right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if International Consolidated Airlines Group, S.A. made the list?
More reading
- Is IAGâs share price too cheap to ignore after an 11% drop following Q3 results?
- 3 FTSE 100 best-sellers I won’t touch with a bargepole
- Should investors consider buying last weekâs FTSE 100 losers IAG, Rightmove, and Smith & Nephew?
- How to prepare for a stock market crash — before it’s too late
- My favourite FTSE 100 value stock just plunged 7%! Should I buy more?
Harvey Jones has positions in GSK, International Consolidated Airlines Group, and JD Sports Fashion. The Motley Fool UK has recommended GSK and Hikma Pharmaceuticals Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
