I think there are some terrific bargains to be found in the FTSE 100 right now. With that in mind, here’s my list of the best stocks to buy right now, that I’m considering adding to my own personal investment portfolio.
Best stocks to buy right now
One of the easiest ways to establish whether or not a business is cheap to look at its ratio of earnings to the current share price.
The so-called P/E ratio is one of the oldest financial ratios. It measures how long investors would have to wait to earn their money back if they owned the whole business.
For example, a P/E of five implies that I’d earn my money back in five years if I bought the whole business.
This can be an excellent guide to value because it can become a self-fulfilling prophecy. If a stock looks cheap, it can attract investors. That would push up the stock price and return the valuation to normal levels.
Of course, this is all just theory. In the real world, there’s no guarantee buying a low P/E stock will yield high returns. What’s more, a low P/E can be a sign that the business is struggling.
So, this figure should never be used without considering other factors. Still, I believe that studying stocks with low P/E ratios can be a great place to start looking for dirt-cheap stocks.
With that in mind, I think some of the best FTSE 100 stocks to buy now are Imperial Brands, 3i, BT and Aviva. All four of these companies are currently selling in the market for less than seven times earnings. That’s compared to the FTSE 100 average of 14. I think that looks too cheap to pass up.
That being said, while these firms look cheap, they’re not without their issues.
FTSE 100 investments
Imperial Brands is struggling with falling revenues and profits due to declining cigarette sales around the world. Meanwhile, BT has been grappling for some time with high debt levels and increased competition in the UK telecommunications market.
These companies are working to rectify these issues. Imperial has been slashing costs and is looking to divest more brands to increase its focus on core markets. BT is spending more on customer service and invested in infrastructure to try and rekindle customer growth.
Aviva and 3i also have their benefits and drawbacks. Aviva has been struggling for direction for some time. As a result, growth has stagnated. The company is now looking to turn things around with asset sales. This could yield results, although as of yet, it is too early to tell.
3i’s private equity and infrastructure businesses are quite tricky to understand, and that has held back the company’s valuation. Nevertheless, its portfolio of private equity assets and infrastructure investments have performed exceptionally well over the past 12 months, providing a safe haven for investors in stormy waters.
So, while each of these companies does face challenges, they have opportunities as well. I think their low valuations more than makeup for the uncertainty that dogs the shares in all cases. That’s why I would buy these dirt cheap FTSE 100 bargains for my portfolio today.
