The stock market crash in March has been followed by a powerful rally that’s left the FTSE 100 up by about 15% from its March lows. Finding cheap FTSE 100 shares isn’t as easy as it was two months ago, but I think there are still some bargains to be had.
Today I’m going to look at three FTSE 100 stocks I’d buy today.
The right time to buy
Until this year, defence group BAE Systems (LSE: BA) has an unbroken dividend record stretching back to 1993. During this 27-year period, BAE’s payout rose from 1.75p to 23.2p per share.
Of course, BAE has faced some problems during this time. For example, in recent years investors have been concerned about the outlook for new shipbuilding and aircraft orders.
However, the company has generally handled the challenges it’s faced and kept new orders flowing in. Diversification has also helped — BAE is generating attractive growth in areas such as electronic systems and cyber security.
The coronavirus pandemic is only expected to have a limited impact on the business, but BAE’s dividend has been suspended as a precaution. This is a disappointment, but I don’t think it affects the investment case.
BAE shares have fallen by 25% over the last three months and are trading on just 10 times forecast earnings at the time of writing. When the dividend is reinstated, I’d expect a yield of 4%-5%. I rate this FTSE 100 share as a buy.
Mining for winners
Another FTSE 100 share that’s caught my eye recently is mining group Anglo American (LSE: AAL).
Anglo shares are down by nearly 40% this year, leaving them lagging behind the FTSE 100. This big sell-off is being driven by fears that a global recession could hit demand for materials such as copper, iron ore and coal. Anglo American is also suffering from a slump in the diamond market, where its subsidiary De Beers is one of the world’s largest producers.
I accept that things could get worse for Anglo. But boss Mark Cutifani has cut spending and paid off a lot of the group’s debt over the last five years. I think the company is in a pretty good position to ride out any storms that lie ahead.
Analysts’ estimates price the stock on about eight times 2020 forecast earnings, with a dividend yield of 5%. A lot could still change as this year unfolds, but I think Anglo looks decent value at this level.
A FTSE 100 share I’d buy today
My final pick is packaging group Mondi (LSE: MNDI). Oddly, Mondi was actually part of Anglo American until 2007, when it was spun out into a separate business.
This demerger has worked out well for investors so far. Even after this year’s stock market crash, Mondi shares are up 200% since 2007.
Sales clocked in at €7.3bn last year, giving some idea of the global scale of Mondi’s business. The company says that disruption during the coronavirus pandemic has been limited so far, with strong demand in areas such as food packaging.
Mondi enjoys strong profit margins and has €1.5bn of cash on hand to ride out the Covid-19 storm. Although the dividend has been suspended, I expect payouts to return fairly quickly. With the stock trading on around 11 times forecast earnings, I see this FTSE 100 share as a long-term buy.
