These FTSE 100 stocks seem to offer top value at current prices. Are they too cheap for me to miss today? Or should I avoid them like the plague?
Riding the rising oil price
It seems to be all systems go for the oil price. Late last week the Brent crude benchmark oil price struck seven-year peaks above $90 per barrel. The fall of this key technical level could lead to more heady share price gains for fossil fuel producers like Shell (LSE: RDSB). Speculation is growing that the black liquid will barge through $100 sooner rather than later as supply issues grow.
Shell’s share price has just leapt to its highest for two years as a result. But it still looks pretty cheap on paper, leaving plenty of scope for more gains. Today the oil major changes hands on a price-to-earnings growth (PEG) ratio of 0.2. This is well inside the bargain watermark of 1 and below.
As a long-term investor, though, I worry about what fate awaits Shell’s share price in the years ahead. Crude demand is in danger of sinking much more sharply than some anticipate as investment in renewable energy takes off. There’s also the risk that institutional investors will turn their backs on the world’s worst-polluting companies as fears over the climate crisis grow.
Britain’s biggest private pension fund, the Universities Superannuation Scheme, is the latest market mover to dedicate billions of pounds to more environmentally-friendly investments. Shell is spending fortunes to build its exposure to greener energy forms, but I fear this could be too little too late. Its main business is oil and it stands to lose out as the responsible investing phenomenon gathers pace.
A better FTSE 100 share to buy?
Tesco (LSE: TSCO) remains a highly-popular FTSE 100 stock and it’s not hard to see why. It’s a giant in the ultra-defensive food retail industry and boasts a loyal customer base that dwarves its rivals. It also offers the biggest online delivery service in the business and is planning to expand its service in this fast-growing sub-segment, too.
I’m afraid Tesco is another share I’m not prepared to take a risk with, though. It’s not just the expansion of discounters Aldi and Lidl and US online goliath Amazon that pose significant long-term risks to profit margins. A slew of post-Brexit regulatory changes that could impact stock availability, cause labour shortages, and prompt higher import expenses threaten to hit profits hard as well.
The danger of prolonged carbon dioxide shortages is another major risk for Tesco. A government supply accord is about to run out that could hit fizzy drink production and cause massive meat shortages.
Tesco’s share price looks pretty cheap today. The supermarket also trades on a PEG ratio of 0.2. However, the colossal dangers facing the business once the current financial year ends next month means I won’t be bargain shopping here. There are plenty of other US and UK shares I’d rather buy than Shell or Tesco today.
