The Motley Fool

3 Of The Biggest ‘Sells’ In The FTSE 100: BT Group plc, Associated British Foods plc And Relx PLC

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

While the fact that the FTSE 100 is within 5% of its all-time high does not necessarily mean that it is overvalued, there are a number of stocks within the index that appear to offer poor value for money. Of course, this does not mean that they are low-quality businesses or that they are badly run. It simply means that their share prices and valuations seem to be excessive and, for investors looking for either a lucrative income or impressive capital gains, there are better options elsewhere.

A notable example is BT (LSE: BT.A) (NYSE: BT.US). There is currently a buzz surrounding the company as it has recently transitioned from landline and broadband provider to quad play operator, with a very appealing pay-tv and great value mobile phone offering now in operation. Furthermore, its proposed takeover of EE would create a major player in the mobile market and allow BT even more scope to cross-sell its products to a new set of customers.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

However, while BT does have a bright long term future, its current valuation appears to be too high. For example, it currently trades on a price to earnings (P/E) ratio of 15.7 and, looking ahead, there could be a number of challenges ahead for BT.

Firstly, the EE deal may be blocked by the regulator, which has voiced concerns over BT’s control over the telecoms and media market. Secondly, BT’s balance sheet is not particularly strong, with a large pension liability meaning that a rights issue may be required if the EE deal does come off, while thirdly, BT is giving away many of its products at very low prices, which may not be healthy for its margins.

Similarly, ABF (LSE: ABF) also offers poor value for money. Its Primark division has been a superb performer in recent years, but with the UK economy improving and disposable incomes rising in real terms, shoppers may choose to move away from discount stores and return to the purchase of higher priced brands. As such, ABF’s future performance may be hurt somewhat, while a continued supermarket price war may also cause its margins to be suppressed somewhat. And, with ABF trading on a P/E ratio of 32.6 despite its profit being set to fall by 6% this year, it appears to be hugely overvalued.

Meanwhile, Relx (LSE: REL), formerly called Reed Elsevier, has seen its share price soar by 115% in the last five years. However, it now looks richly valued, with it having a P/E ratio of 18 despite its growth prospects being roughly in-line with those of the wider index. In fact, Relx has a price to earnings growth (PEG) ratio of 2.4, which indicates that its medium term prospects may already be priced in. As such, its share price could come under pressure moving forward, thereby making now the right time to sell and invest elsewhere.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.