FTSE 100 hits 10,000 at last – but these shares are still dirt cheap!
On Friday (2 January), the FTSE 100 finally broke through the 10,000 barrier for the first time in history. It capped a brilliant 12 months for UK shares, but it does raise one worry for many investors. Are they too late to benefit from its resurgence?
My short answer is no. For those happy to chase momentum, I think the FTSE 100 could still have further to run as global investors wake up to what theyâve been missing. And for those, like me, who prefer buying stocks when theyâre undervalued and out of fashion, there are still plenty to choose from.
Blue-chips are red hot
The UK’s benchmark blue-chip index rose 21.5% last year, having started 2025 at just over 8,260. All dividends are on top. With the average trailing yield north of 3%, the total return was closer to 25%.
After years of being ignored in favour of big, brash Wall Street mega-caps, blue-chips are finally back in fashion. As concerns grow about froth in US tech, investors have started to diversify and many seem genuinely surprised by how undervalued UK shares are.
Personally, Iâm delighted. Iâve been filling my boots from the FTSE 100 in recent years, especially high-yield dividend stocks. Iâve locked in yields of up to 10% and Iâm now enjoying capital growth as well.
Iâve still got cash sitting in my trading account, and Iâm weighing up where to deploy it next. I favour undervalued shares, and I still see plenty of those around.
The FTSE 100 trades on an average price-to-earnings (P/E) ratio of about 14.9, although some put it closer to 17.7. Either way, thatâs hardly demanding, and miles cheaper than the S&P 500 on roughly 27.4. I donât buy the index itself though. I prefer individual shares, many of which look far cheaper still.
JD Sports Fashion is one of the most striking examples, trading on a P/E of just 6.9. Its shares have struggled as cash-strapped consumers rein in spending and key partner Nike struggles, but I hold the stock and back it to recover over time.
International Consolidated Airlines Group shares fly
Airlines also look cheap. Budget carrier easyJet trades on a P/E of just 7.7, while International Consolidated Airlines Group (LSE: IAG) stands at 8.7.
Five more FTSE 100 stocks have P/Es below 10. Hikma Pharmaceuticals and Centrica are both on 9.2, BT Group sits at 9.8, while Shell and cigarette maker Imperial Brands trade at 9.9.
I bought International Consolidated Airlines Group last year. Its shares climbed almost 40% in 2025 and are up 240% over three years as flying demand recovers strongly after the pandemic.
Known as IAG, the group owns airlines including British Airways, which has benefitted from a rebound in transatlantic travel. Covid left it nursing heavy debts, but itâs paying those down, has restarted dividends and even returned â¬1bn to shareholders through a share buyback.
Given that performance, Iâm a little baffled by its low P/E. My assumption is that airlines will always trade at a discount because of the risks involved. High fixed costs leave them exposed to everything from fuel prices and strikes to extreme weather and recession.
Even so, I think IAG is still worth considering today, along with the other cheap shares mentioned here. The FTSE 100 may be flying, but thereâs still plenty of value for those prepared to do a little digging.
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Harvey Jones has positions in International Consolidated Airlines Group and JD Sports Fashion. The Motley Fool UK has recommended Hikma Pharmaceuticals Plc, Imperial Brands Plc, and Nike. 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.
