2 beaten-down FTSE 100 stocks I’d buy right now

Bilaal Mohamed identifies two FTSE 100 (INDEXFTSE:UKX) property firms with spectacular recovery potential.

| More on:

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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Shopping centre owner Intu Properties (LSE: INTU) found itself being relegated from London’s premier league FTSE 100 index earlier this year as a result of increased investor pessimism over the retail sector. But after shedding around a fifth of its value in just 12 months, could it be time for contrarians to step in and be greedy when others are fearful?

The £2.8bn property giant which owns many of the UK’s largest and most popular retail destinations, including Lakeside in Essex, Cribbs Causeway, and Manchester’s Arndale and Trafford Centre, has seen its share price in steady decline since early 2015, when it was trading as high as 376p. Today the shares can be picked up at a heavily discounted price of around 200p per share.

Protection from the taxman

For the past 10 years Intu has operated as a real estate investment trust (REIT) which means it enjoys a measure of protection from corporation tax in return for an obligation to distribute a significant amount of cash flows to shareholders.

As a REIT, Intu doesn’t pay UK direct taxes on the income and capital gains from its qualifying UK property rental business, with one requirement of this regime being that it must distribute at least 90% of taxable profits from the rental business to shareholders each year. That’s great news for dividend chasers.

The share price slump means that Intu is now trading on a much lower earnings multiple than in recent years at 15, and also supports a much higher dividend yield of 6.4%. If the shareholder payouts can be maintained, this alone should be enough to protect the share price from further falls.

Rising tide of pessimism

Still managing to hold on to its blue-chip status, but only just, is property peer Hammerson (LSE: HMSO). Like Intu, Hammerson has also had to deal with the rising tide of pessimism, with its shares falling to 525p, from highs of over 705p less than three years ago.

The London-headquartered property group also has a retail-focused portfolio that includes investments in 23 prime shopping centres in the UK, Ireland and France, as well as 17 retail parks in the UK, and 20 premium outlets across Europe. Despite the doom and gloom that surrounds the retail sector at the moment, our friends in the City still expect Hammerson to eke out annual mid-single-digit earnings growth in each of the next two years, which is certainly better than the company’s current share price would suggest.

Like Intu, Hammerson operates as a Real Estate Investment Trust (REIT) and distributes a generous chunk of its profits as dividends, which currently provide its shareholders with a solid yield of around 5%. Hammerson’s shares currently trade on a price-to-earnings multiple of 17, which although not cheap by conventional metrics, is much lower than its most recent five-year range of 20-25.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Bilaal Mohamed has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

More on Investing Articles

Investing Articles

Is Amazon still a top growth stock after its Q4 report?

With sales growth slowing and AI investments weighing on near-term profits, do investors have better stocks to consider buying than…

Read more »

Investing Articles

Down 15% and with a P/E below 9! Is the GSK share price still in deep value territory?

Harvey Jones has something to celebrate after a positive set of results boosted the GSK share price after a disappointing…

Read more »

Investing Articles

The Diageo share price is down 44% since 2021, but I won’t sell my shares!

The Diageo share price has almost halved since peaking in late 2021. But with the stock at a one-year low,…

Read more »

Man changing battery on electric bicycle
Investing Articles

Suddenly my FTSE income shares are giving me growth too – including this 9% yielder!

Harvey Jones loves his FTSE 100 dividend income shares but was disappointed by the lack of growth. Now it looks…

Read more »

Investing Articles

This FTSE AIM travel business could absolutely skyrocket in 2025

FTSE AIM stock Jet2 appears to be a bargain in plain sight. I’m desperately searching for reasons not to buy…

Read more »

Investing Articles

This Bank of England news makes me fear for Lloyds and its share price!

Warnings of weak economic growth, resurgent inflation, and falling interest rates pose a toxic cocktail for Lloyds' share price.

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

2 UK shares that could soar if interest rates sprint lower!

The Bank of England's latest meeting has fed speculation of swingeing interest rate cuts. I think these UK shares could…

Read more »

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Investing Articles

My favourite FTSE dividend stock just jumped 17%! So why am I sad?

This investor has mixed feelings today as a quality dividend stock from the FTSE 250 surged higher in his portfolio.…

Read more »