FTSE 100 recovery: I vowed to buy these 2 ‘bargain’ shares. Did it work?

The FTSE 100 has recovered strongly from the depths of March’s market crash. Tom Rodgers looks again at two shares he promised to buy.

| 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.

It has been the year from hell for FTSE 100 investors. Most of us have suffered with steep portfolio losses and a slow, tentative recovery. But news that the first wave of Covid-19 vaccines could be on the way has improved market sentiment.

So I’m looking back to what I wrote in the depths of the March market crash. And specifically, two companies I said I would buy when the FTSE 100 calmed down. 

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

FTSE 100 joy

FTSE 100 companies had to make seriously painful dividend cuts in the market crash. Some, like Royal Dutch Shell, for the first time in decades. But payouts are starting to return, ever so slowly.

At this point I’ll just quickly discuss the first company I considered in March. That is, AIM-listed video game firm Team17 (LSE:TM17). Its premium game Overcooked! All You Can Eat has now launched on the next-gen Xbox and Playstation 5 consoles. And half-year results out on 10 September showed first half revenues up 28% to £38.8m, profits 21% higher, and net cash up to £50.4m. 

At a price-to-earnings ratio of 55, it’s not cheap. But it is super profitable. And a £1bn market cap is not very far away. Like one of my other early investments, Games Workshop, I could definitely see the business joining the FTSE 250

I still see the business as a sound long-term investment. So nothing has really changed there. But not every investor wants to take a punt on a smaller company, no matter how good it is. So I’ll focus on FTSE 100 giant Aviva (LSE:AV) instead.

Insurance policy

News out on Monday 23 November reconfirmed the direction CEO Amanda Blanc is going with the recovering FTSE 100 firm. That is, selling its 80% stake in Italian joint venture partner Aviva Vita for €400m cash. 

Aviva still owns three other Italian businesses and said it was reviewing them “to maximise shareholder value”. So more sales could easily be on the cards here. 

This is the extension of Blanc’s mass debt-cutting programme. It started by Aviva selling its underperforming French arm to Allianz, then its majority stake in its Singapore business for £1.6bn. Blanc has said she wants to cut Aviva’s Asian and European exposure to refocus on the UK, Ireland, and Canada.

The FTSE 100 stalwart lost a lot of fans — including me — when it made harsher-than-expected dividend cuts back in May. So I’ve been watching Aviva closely to see if it merits a reappraisal. 

Growing up

Aviva shareholders were particularly tough on former boss Maurice Tulloch for not moving fast enough on overseas sales. So to see Blanc pulling in a couple of billion quid is very heartening. 

But wait, I hear investors cry. Won’t all these sales impact Aviva’s ability to grow? To an extent, yes. But there are more pressing matters for Blanc to deal with. 

Chief among her concerns right now is shoring up Aviva’s balance sheet so it is affordable to start increasing dividend payments. That means reducing debt and improving the company’s capital Solvency II ratio. This latter point is a regulatory duty and not optional. The Italian sale boosts Aviva’s net asset value by £100m and improves Solvency II by £200m. 

I think Aviva under Blanc is moving the right direction now. And a P/E ratio of just 5 definitely makes it a tempting option. 

More on Investing Articles

Playful senior couple in aprons dancing and smiling while preparing healthy dinner at home
Investing Articles

Best British dividend stocks for July

We asked our freelance writers to share the top income stocks they’d buy in July, which included Dividend Aristocrats and…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

How I’d apply the Warren Buffett method to buying shares

Learning from billionaire investor Warren Buffett, our writer explains his own approach to investing in shares for his portfolio.

Read more »

pensive bearded business man sitting on chair looking out of the window
Investing Articles

This dividend share yields under 1% — but I’d still buy it

This dividend share has a low yield. So why would our writer consider adding it to his income portfolio?

Read more »

Young lady working from home office during coronavirus pandemic.
Investing Articles

Looking for a good share to buy? Here’s how I do it

Here are two approaches our writer uses when hunting for a good share to buy for his portfolio to aim…

Read more »

man in shirt using computer and smiling while working in the office
Investing Articles

One cheap FTSE 100 share I’d buy for a new bull market

This FTSE 100 share is unloved and starting to look seriously cheap, says Roland Head.

Read more »

Young brown woman delighted with what she sees on her screen
Investing Articles

How I’d invest £500 in UK shares in 2022

Investing a small amount of capital in UK shares can result in high commission costs. Zaven Boyrazian explains how to…

Read more »

Black woman using loudspeaker to be heard
Investing Articles

2 battered FTSE dividend stocks to buy in July!

I'm still searching the FTSE 100 for the best bargains to buy. I think these two big dividend shares are…

Read more »

Woman pulling baffled face
Investing Articles

Can I trust Lloyds’ 6.1% dividend yield?

The Lloyds' share price has sunk in 2022, causing the bank's dividend yield to leap. But can I really trust…

Read more »