Since closing on Friday, 8 April, the UK’s FTSE 100 index has lost almost 315 points, down 4.1% in nine trading days. This leaves the Footsie down overall in 2022, albeit by a mere 0.3% so far.
FTSE 100 risers and fallers
Most FTSE 100 shares have fallen in value over the past three months. Of 100 stocks in the blue-chip index, only 30 have risen in value over 90 days. These gains range from 24.4% to just 0.6%, with the average increase being 7.2%.
At the other end of the scale lie 70 FTSE 100 shares that have lost value. These declines range from just 0.4% to a whopping 38.4%. The average fall across all 70 losers is 13.4%. I’ve been looking for cheap, lowly rated and deep-value shares among these laggards. Here are three that I don’t own, but would happily add to my family portfolio today.
Three discounted shares I’d buy today
During my latest ‘bottom fishing’ in the FTSE 100, I found three company shares that have taken a beating over the past three months. All three companies are household names: ITV, Barclays and Royal Mail. In the past 90 days, these three stocks have fallen by 34.7%, 28.6% and 25.4%, respectively. This places them at #99, #97 and #92 in the Footsie over this time period.
As a result of these recent falls, I believe that all three shares have dropped into value territory. Here are their current fundamentals:
| Company | Sector | Share price (p) | Market value (£bn) | P/E | Earnings yield | Dividend yield | Dividend cover |
| ITV | Broadcaster | 74.8 | 3.1 | 8.0 | 12.5% | 4.4% | 2.8 |
| Barclays | Bank | 143.8 | 24.7 | 3.9 | 25.4% | 4.2% | 6.1 |
| Royal Mail | Postal services | 350.1 | 3.4 | 4.0 | 24.9% | 4.8% | 5.2 |
Why am I drawn to these marked-down FTSE 100 shares today? Simply because their recent falls have made all three stocks appear dirt-cheap to me.
First, their price-to-earnings ratios range from 3.9 at Barclays to 8 at ITV — very undemanding multiples. Second, their earnings yields range from 12.5% at ITV to a bumper 25.4% at Barclays. Third, all three offer generous yearly dividend yields, ranging from 4.2% at Barclays to 4.8% at Royal Mail. These cash yields all exceed the 4% a year or so on offer from the wider FTSE 100.
This is only a mini-portfolio
Although I see value in all three of these FTSE 100 shares, I would never build a portfolio with only three stocks. That said, this mini-portfolio’s average earnings yield is a tasty 20.9%. Also, it offers a dividend yield of 4.5% a year. Of course, company dividends are not guaranteed, so they can be cut or cancelled at any time. Then again, this 4.5% cash yield is easily covered 4.7 times by earnings, which provides a huge margin of safety.
Lastly, all three companies operate in very different industries. Thus, there is little or no overlap between their business models. Of course, any or all of these stocks could be undone by unexpected future events, such as new Covid-19 variants, a Chinese slowdown, or a UK recession. Even so, I’d happily buy and hold these three cheap shares today, both for capital growth and passive income.
