Looking at the FTSE 100 on Thursday, I see mostly a sea of red. Apart from a handful, shares in London’s top index are falling across the board.
Falling share prices mean better bargains in my books. I reckon the FTSE 100 still contains a large number of companies whose share prices are firmly in ‘buy’ territory. The index is up 8.5% in 2021, but it’s still down 5% over two years. So what do the latest movements make me want to buy?
I’ve been liking the look of M&G (LSE: MNG) for some time. Its shares have largely been resisting the Thursday FTSE 100 sell-off, down only around half a percent by early afternoon. They have fallen back sharply since the summer, though. We’re looking at a drop of 22% since 1 June, and a 12% decline over the past two years.
The asset management firm, previously part of Prudential (LSE: PRU), is on a trailing P/E of around 4.5 and a dividend yield of 9%. That sounds screamingly cheap on the face of it. So why are M&G shares so out of favour right now? My Motley Fool colleague Rupert Hargreaves reckons it’s at least partly due to the company’s relatively small size and its lack of a proven track record.
I suspect he’s right. And with the UK facing such an uncertain economy, I think the shares could remain lowly valued for some time. But I’m seriously thinking of buying.
A favourite FTSE 100 sector
Prudential itself is among those down in the FTSE 100 dumps on Thursday. I’ve always rated the Pru highly, and I almost always have a stake in the insurance business. In fact, if I didn’t already own some Aviva shares, I would probably have added Prudential to my investment portfolio by now.
The Prudential share price is up 15% over the past two years. A number of stocks benefited from the flight to safety that characterised the market reaction to the pandemic crisis. And a good few of those have since fallen back after attention has started shifting to bargain growth stocks again.
On that score, I can’t help feeling there might be a bit more profit-taking affecting Prudential shares in the coming months. And the latest weakness suggests the current price might be a bit fragile. But if we do see falls, I’ll find it hard to resist.
Another out-of-favour industry
The third FTSE 100 stock I’m drawn to is among the few actually rising, if only by a tiny amount. It’s Taylor Wimpey (LSE: TW), and it’s in another sector I’m bullish about right now. I already have some housebuilder shares in the form of Persimmon, even though I see medium-term risks in the sector.
Inflation is coming, and that will surely mean interest rate rises. On top of that, the economy over the next couple of years could be very fragile. With the end of the stamp duty holiday, and construction sector costs rising strongly, investors are turning against property-related investments.
But the sector has been reporting strong results. And looking further ahead, I still see healthy long-term demand. This is another stock where I suspect we could see some medium-term dips. But with my long-term outlook, I am definitely thinking about a buy here.
