The Motley Fool

2 cheap FTSE 100 stocks I wouldn’t miss buying now

Business development to success and FTSE 100 250 350 growth concept.
Image source: Getty Images

It appears that the FTSE 100 index is headed back to its pre-pandemic highs of early 2020. A rise in the index levels also shows that its constituents’ share prices are rising, of course. But not all stocks that form the index have risen equally. Some of them are still lagging. I reckon 2022 could be their year. 

Recovery to encourage FTSE 100 banks

One segment that looks promising to me right now is banking. Banks are cyclical stocks. This means that they tend to be more sensitive to ups and downs in the economy than other stocks like utilities or pharmaceutical companies. So, as the growth cycle turns upwards, fortune could smile upon them.  FTSE 100 banks have already seen improvement in both their performance and their share prices this year. And in the next year, even better performance is possible. 

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

Rising interest rates

Interest rates are expected to start rising sometime soon. Inflation is at an uncomfortably high 4% level and is expected to stay there all through next year. This is likely to prompt the Bank of England to raise interest rates soon enough. This in turn could result in an increase in interest rates by commercial banks as well. Greater flexibility to raise interest rates could be good for banks’ margins. And that could mean improved performance. 

Freedom to set dividends

Banks could also benefit from the flexibility to set their own dividends. They were regulated against doing this for a while. As the pandemic began, the authorities first asked them to cease paying dividends and later to pay them only to a limited degree. Now that these restrictions have been removed, they are free to pay out as much in dividend income to investors as they like. Right now, FTSE 100 banks’ dividend yields are below or just at the average yield for the index as a whole. But I am looking out for future developments on this. This is because I think dividend payouts could impact their stock market fortunes significantly. 

2 FTSE 100 banks I’d buy

Even though they have recovered a fair bit, banks like Barclays and Natwest are still not back to their pre-pandemic levels. They are almost there, but not quite. Also, their price-to-earnings (P/E) ratios are quite low. Barclays’ is a super-low 6.4 times and Natwest’s is around 10.5 times. Alternative indicators like price-to-book are sometimes preferred when assessing whether banks are fairly valued or not. But to get a broad comparison across FTSE 100 stocks, P/E is still a good one to consider, in my view. With low P/Es and recent improvements in performance, I reckon that their share prices could rise more. 

Of course runaway inflation, a slow recovery, and a return of the pandemic could derail their growth. But all things considered, their prospects look good to me for now. I would buy them now, before their share prices run up further. 

FREE REPORT: Why this £5 stock could be set to surge

Are you on the lookout for UK growth stocks?

If so, get this FREE no-strings report now.

While it’s available: you'll discover what we think is a top growth stock for the decade ahead.

And the performance of this company really is stunning.

In 2019, it returned £150million to shareholders through buybacks and dividends.

We believe its financial position is about as solid as anything we’ve seen.

  • Since 2016, annual revenues increased 31%
  • In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259
  • Operating cash flow is up 47%. (Even its operating margins are rising every year!)

Quite simply, we believe it’s a fantastic Foolish growth pick.

What’s more, it deserves your attention today.

So please don’t wait another moment.

Get the full details on this £5 stock now – while your report is free.

Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays. 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.