2 cheap FTSE 100 shares I’d buy in July

This Fool would buy these two FTSE 100 stocks that look undervalued compared to their growth and recovery potential.

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I think some of the best shares to buy in July could be cheap blue-chip stocks. And with that in mind, here are two cheap FTSE 100 shares I’d buy for my portfolio over the next four weeks.

FTSE 100 shares

The first company on my watch list is Barclays (LSE: BARC). There are a couple of reasons why I’d buy this FTSE 100 stock. 

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Not only is it one of the largest retail banks in the UK, but it also has a large international investment bank. This suggests to me the business will be able to ride the UK economic recovery. But, at the same time, its global investment arm should benefit from increasing market activity as the economy recovers.

Indeed, the FTSE 100 group’s investment bank was invaluable last year. Fees generated from investment banking deals more than offset losses in other sections of the enterprise at the height of the pandemic.

While it isn’t possible to say if the same will happen over the next few months, I think it’s likely Barclays’ diversified business model will help the group outperform in the recovery.

In addition, the bank is currently trading at a high-single-digit price-to-earnings (P/E) multiple and a discount to book value of around 40%.

While I’m optimistic about the FTSE 100 company’s outlook, I’m also aware it could face some challenges. These include ultra-low interest rates, which could weigh on profit margins for years. Regulatory constraints may also hold back the group’s dividend and growth potential.

Despite these risks and challenges, I’d buy the FTSE 100 stock for my portfolio today.

Industrial giant

The other cheap FTSE 100 stock I’d buy for my portfolio today is Weir Group (LSE: WEIR). This company produces critical components for the mining, oil and gas and power sectors. Products include pipes, valves and ore processing machines.

Over the past 12 months, prices for essential commodities such as iron ore and copper have jumped as demand has increased. Governments around the world are spending trillions on infrastructure projects to jumpstart their economies after the pandemic.

To meet the increased demand, mining companies will have to invest in new equipment. That could translate into rapid earnings growth at equipment producers like Weir.

As such, while the FTSE 100 stock doesn’t look particularly cheap, at the time of writing (it’s trading at a P/E of 24), I think the stock’s future growth may compensate for this high valuation. What’s more, due to the unique nature of Weir’s products, I reckon the company deserves a higher-than-average multiple.

That said, there’s no guarantee booming commodity demand will translate into higher sales for Weir. The company could also suffer from additional lockdowns, which could inflict further pain on the economy.

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Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays and Weir. 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.

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