3 dirt-cheap FTSE 100 shares to buy for 2022

These cheap FTSE 100 stocks could outperform the market in 2022 considering their current depressed valuation, says this Fool.

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Scene depicting the City of London, home of the FTSE 100

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I have been looking for dirt-cheap FTSE 100 shares to buy for my portfolio in 2022. I am concentrating on these cheap equities because I think they can produce better returns for my portfolio as the economy begins to rebuild.

They may benefit from both earnings growth and an improvement in market sentiment. This double tailwind could produce handsome profits for my portfolio. With that in mind, here are three FTSE 100 companies I would buy right now as recovery and value plays.

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FTSE 100 value stocks 

The first on my list is the real estate investment trust (REIT) British Land (LSE: BLND). Shares in this company are currently trading at a significant discount to its book value. The book value is calculated by using the value of the firm’s property minus its debt. Therefore, the market capitalisation of the REIT is currently below the value of the property it owns. 

This is an exciting situation. I think many investors would jump at the chance of being able to buy a house for less than it is worth. However, it does not look as if the market is willing to take the same risk with this REIT. 

I can understand why. The corporation owns a portfolio of commercial retail and office properties. Both of these markets are facing pressure as the pandemic reshapes the retail industry and office market.

Still, for the most part, the valuations of these assets have held up relatively well. At the beginning of the pandemic, the FTSE 100 company struggled to collect all the rent due from its tenants. It now looks as if this issue is behind the enterprise.

It is also reshaping its portfolio to capitalise on the evolving property market trends. Management has bought in more flexible office space, and the group has been investing heavily in open-air retail parks. 

Of course, there will always be the risk that this strategy will not yield the desired results. That is probably the biggest challenge the company faces right now. Trying to change with the market can be pretty hit and miss. Its balance sheet could also face pressure from rising interest rates.

Overall, I think British Land is changing for the better. That is why I would capitalise on its current valuation and buy the stock while it looks cheap. 

Shares to buy for growth

When it comes to undervalued FTSE 100 stocks, I believe ITV (LSE: ITV) takes the crown. Shares in the company plunged at the beginning of 2020, as the pandemic effectively shut its production business and led advertisers to pull spend.

The firm has recovered almost all of its lost revenue nearly two years on. In a recent trading update, ITV’s management said the company is on track to report a record performance in 2021. Booming advertising revenue and growing demand for its studios business have helped the corporation return to growth. 

Despite this recovery, the stock continues to trade below the level it started 2020. This is the main reason why I would acquire ITV for my portfolio. The market seems to be overlooking the group’s recovery. It is also planning to restore its dividend, and management is looking for new growth initiatives. 

In one of these initiatives, the company is taking stakes in smaller businesses, which it thinks has growth potential. ITV is taking a stake in these enterprises in return for advertising time on its network, a strategy that seems to be working for both partners. 

The elephant in the room here is the company’s competitors. Deep-pocketed American streaming giants are fiercely fighting for market share, and ITV cannot compete with these operations.

So far, it has been able to hold its own. The group even produces some programmes on behalf of the streamers. However, there is no guarantee this trend will continue. The company does not have the financial clout, nor the global reach of these corporations. 

Even after considering this risk, I still think the company is an attractive investment for 2022. That is why it features on my list of the best FTSE 100 shares to buy for next year. 

International expansion

The final FTSE 100 company I would acquire for my portfolio as an undervalued growth investment in 2022 is Prudential (LSE: PRU). After splitting its US and UK businesses over the past few years, the company is now a pure-play-Asia growth enterprise. Hong Kong accounts for the vast majority of its sales, although an increasing percentage comes from other markets across Asia, including Vietnam. 

The stock is trading at a discount of around 11% to the level it began 2020. This does not make much sense to me. Thanks to strict virus control measures, many Asian economies have performed better than their Western peers throughout the pandemic.

These regions also have tremendous scope for growth in the financial space. Most have a low-level penetration for products such as life insurance and pensions. In some markets, the rate of penetration is a fraction of the level in the UK. 

This suggests companies like Prudential have an extremely long runway for growth in front of them. Therefore, its brand is already well known across the region, and it has a high level of customer loyalty. These qualities should help the business capitalise on the market opportunity. 

That said, the FTSE 100 company is not the only financial institution in Asia. It faces fierce competition from local operators, some of which have more capital and connections. These competitors may be able to grab market share from the group if it takes its position in the market for granted. Prudential needs to stay on its toes and keep advertising to keep fending off the competition. 

Even after taking these competitive forces into account, I think the stock has tremendous potential for the year ahead, and beyond.

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Rupert Hargreaves owns ITV. The Motley Fool UK has recommended British Land Co, ITV, and Prudential. 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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