It’s one of the biggest shopping weeks of the year, with Black Friday whipping consumers into a pre-Christmas frenzy by offering huge discounts in the shops.
The FTSE 100 is also throwing up some amazing discounts right now, and they will ultimately make you richer, rather than poorer. Here are my three favourite Black Friday bargains: Barclays (LSE: BARC) (NYSE: BCS.US), GlaxoSmithKline (LSE: GSK) (NYSE: GSK.US) and Tesco (LSE: TSCO).
Barclays
At 237p, big bad bank Barclays is down 20% from its 52-week high of 297p… but it is showing signs of a recovery, following a solid 5% rise in Q3 profits to £4.94bn.
Barclays still faces a string of threats, including market rigging penalites, mis-selling scandals, challenger banks, crashing investment bank profits (down 38% in Q3) and an ongoing investigation into the current account market.
It has also shown signs of capital inadequacy, with a £12.8bn hole in its balance sheet. At Barclays, every day seems like Black Friday.
The outlook should slowly brighten as the billions keep rolling in, the dividend yield (now 2.73%) is repaired, and reputational damage finally patched up.
Barclays’ core businesses are delivering a return on equity of 10.5%, driven by personal and corporate banking, and the strength of its market-leading credit card Barclaycard.
These are solid operations, and you can buy them at a discount today.
GlaxoSmithKline
Trading at 1475p, GlaxoSmithKline is still 14% off its 52-week high, but the gap is starting to narrow. Its share price is up 7% in the last month, but it still offers one of the most enticing yields on the FTSE 100.
Glaxo currently yields 5.3%, more than 10 times base rate. Better still, today’s valuation of 13 times earnings (against 15 or 16 times) makes this a true Black Friday bargain.
Falling pharmaceuticals and vaccine sales in the US, disappointments in its consumer healthcare division, and the threat of further action over the Chinese bribery scandal have painted 2014 black for Glaxo. But unlike the bankers, I reckon it will learn its lessons quickly. And while you wait, keep re-investing those dividends.
Tesco
Britain’s biggest supermarket is so cheap it is almost impossible to resist, and even harder to trust. At 195p, its share price is 44% below its 52-week high. Customers hate it, investors hate it, regulators hate it: what’s to like?
Well, it’s under new management, and new boss Dave Lewis has a free hand to turn things round. Staff may go, stores may close, prices may fall and Tesco Bank may be sold off.
Almost anything could happen at Tesco right now. It is quite a gamble, even at 6.1 times earnings, but that’s how it’s is in the sales. You never really know if you’ve bagged a bargain, until you get it home.
