2 dirt-cheap FTSE All-Share stocks I’d buy today

Smaller growth stocks can outperform their larger peers. That’s why I’ve always owned a selection of FTSE All-Share investments. 

| 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.

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.

Many UK investors concentrate on blue-chip indices such as the FTSE 100 and FTSE 250 when looking for dirt cheap shares to buy. I think this is a mistake. In my opinion, the FTSE All-Share contains just as many exciting companies. 

This index is much more diverse than its larger peers. Specifically, it’s made up of the top 600 most prominent public companies in the UK, including constituents of both the FTSE 100 and FTSE 250, as well as many other smaller growth stocks. 

Research shows those smaller growth stocks can outperform their larger peers in the long run. That’s why I’ve always owned a selection of these stocks alongside my blue-chip holdings. And I think the FTSE All-Share is the perfect place to find these gems.

Dirt-cheap FTSE All-Share stocks

N Brown (LSE: BWNG) has really fallen out of favour with investors recently. The pandemic has slammed the fashion retailer like a hurricane. Analysts are forecasting a near-90% decline in earnings for the business in 2020. 

These figures look bad, but I’m not interested in what the corporation has done. I’m interested in what it’s going to do. N Brown recently announced it would be raising £100m to pursue an online growth strategy. The business already has a large presence online and, as a result of the pandemic, it’s decided to double down. The money will be used to improve the company’s online offering and infrastructure. 

I think this is the right decision. Which is why I’m considering adding the FTSE All-Share stock to my portfolio today. Not only do the shares look cheap at current levels, according to my figures, but the company is also embarking on an ambitious growth plan. And that could lead to substantial earnings growth in the years ahead. I think investors will be well rewarded as the transformation takes shape. 

Invest in trading

Most investors won’t have heard of FTSE All-Share group TP Icap (LSE: TCAP). However, the organisation provides an essential service in the financial markets. It acts as an interdealer broker, bridging the gap between buyers and sellers of over-the-counter derivative contracts. The company’s traders deal in products such as oil and gas and soft commodities such as wheat and corn, as well as precious metals and foreign exchange. 

This business has relatively low-profit margins, so volume matters. TP is one of the largest inter-dealer brokers in the world, and this gives it a strong competitive advantage. What’s more, the company makes more money in volatile markets. Therefore, projections suggest the group will report substantial earnings growth in 2020. 

Right now, the company’s trading at a forward price-to-earnings (P/E) multiple of just 6. The stock also supports a dividend yield of 6.2%. That’s around 50% above the FTSE All-Share average. I believe this severely undervalues the business, which is why I’m currently eyeing the stock. And even if the shares don’t respond positively in the medium term, that 6.2% dividend yield means I’ll be paid to wait for the firm’s operating performance to improve.

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.

Rupert Hargreaves 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

I’d buy 1,784 shares of this FTSE 100 stock to target £350 of monthly passive income

Muhammad Cheema takes a look at how British American Tobacco shares, with a dividend yield of 10.1%, can generate a…

Read more »

White female supervisor working at an oil rig
Investing Articles

1 ex-FTSE 100 stock that I think will get promoted soon

Jon Smith flags up an energy stock that used to be in the FTSE 100 and currently has strong momentum…

Read more »

Shot of a young Black woman doing some paperwork in a modern office
Investing Articles

With an 8% dividend yield, I think this undervalued FTSE stock is a no-brainer buy

With an impressive yield and good track record of payments, Mark David Hartley is considering adding this promising FTSE share…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

£9,500 in savings? Here’s how I’d try to turn that into £1,809 a month of passive income

Investing a relatively small amount into high-yielding stocks and reinvesting the dividends paid can generate significant passive income over time.

Read more »

Businesswoman analyses profitability of working company with digital virtual screen
Investing Articles

Dividend star Legal & General’s share price is still marked down, so should I buy more?

Legal & General’s share price looks very undervalued against its peers. But it pays an 8%+ dividend yield, and has…

Read more »

Investing Articles

Dividend shares: 1 FTSE 100 stock to consider buying for chunky shareholder income

This company’s ‘clean’ dividend record looks attractive to me and I’d consider buying some of the shares to hold long…

Read more »

Investing Articles

3 of my top FTSE 250 stocks to consider buying before April

Buying undervalued UK shares can be a great way to generate long-term wealth. Here, Royston Wild reveals a handful on…

Read more »

Ice cube tray filled with ice cubes and three loose ice cubes against dark wood.
Investing Articles

Just released: our 3 top income-focused stocks to buy before April [PREMIUM PICKS]

Our goal here is to highlight some of our past recommendations that we think are of particular interest today, due…

Read more »