I own these cheap FTSE 100 shares in my portfolio. Here’s why I’m thinking of buying more of both too.
ESG investing
I expect demand for DS Smith (LSE: SMDS) shares to steadily rise as responsible investing becomes ever more popular. Research shows that companies’ environmental, social, and governance (ESG) policies are becoming ever-more important to UK share investors. In fact this is a FTSE 100 share I bought myself because of its improving green credentials.
DS Smith is one of the biggest cardboard box and packaging producers on the planet. It has taken huge steps to reduce the amount of plastic used in its products in recent years (the business sold off its plastics division recently under this programme). But this is only one environmental initiative in its locker. Other steps include helping companies examine how they can reduce waste; collecting paper and cardboard waste using LNG-powered vehicles; and working with local authorities to boost the amount of material they can recycle.
I think DS Smith should deliver terrific profits growth as e-commerce goes from strength to strength. And its drive to become a mighty green stock should allow it to grab business in an industry where sustainability is growing in importance. Today the FTSE 100 firm trades on a forward price-to-earnings growth (PEG) ratio of just 0.6. It’s important to note that paper prices are rocketing and this threatens to derail DS Smith and its solid profits projections. Still, at current prices I think the boxbuilder might be too cheap to miss.
Another of my FTSE 100 faves
Taylor Wimpey (LSE: TW) is another cheap UK share I’m thinking of buying more of today. Not only does this FTSE 100 company trade on a forward PEG ratio of 0.1 times. A chunky 4.6% dividend yield makes the housebuilder one of the best dividend stocks to buy too.
A steady stream of encouraging data continues to emerge from the British housing market. It’s a phenomenon which reflects a mix of inadequate homes supply and soaring buyer demand. Fresh numbers from Rightmove today showed the average property price rise to a new record of £333,564.
It’s clear that the stamp duty holiday has helped to keep propelling UK house prices skywards. But many other positive factors are likely to remain in play to keep buyer appetite — and with it profits at the likes of Taylor Wimpey — heading higher. I expect interest rates to remain ultra low to aid the economic recovery, while government schemes like Help to Buy and intense mortgage product wars should continue supporting buyer affordability.
There is a fly in the ointment for the profits outlook of Taylor Wimpey, though. The price of building materials and labour is soaring (timber values have increased 80% in six months according to the Construction Products Association, for example). And this could take a big bite out of the FTSE 100 company’s earnings.
