As we approach the mid-point of 2022, I think it’s fair to say that many UK stocks are now looking a lot more attractively valued than they were at the beginning of the year. Today, I’m picking out a trio of fairly cheap FTSE 100 shares and asking whether I should snap them up before they report in June.
Ashtead Group
FTSE 100 equipment hire firm Ashtead (LSE: AHT) releases Q4/full-year numbers on 14 June and I, for one, will be paying attention to them. After all, this is a share I’ve been interested in acquiring for some time now.
The valuation is certainly a lot more attractive than it once was. When I last checked in December, Ashtead was trading at 25 times forecast earnings on the back of record rental revenues. In a year, the stock has declined 25%. This leaves the company on a P/E of just 13 — not at all bad considering the consistently decent margins in this line of work.
Despite current headwinds, I think the outlook is encouraging too. Ashtead should benefit from Joe Biden’s infrastructure bill for a start. Nonetheless, taking a stake now still requires courage given the possible impact of a recession on the construction industry.
If I did buy before June, it would be a starting position only.
Tesco
Tesco (LSE: TSCO) is arguably a far more defensive option. Put simply, everyone needs to eat regardless of how the economy is performing.
Unfortunately, this attribute hasn’t been enough to shield Tesco’s share price from falling. The UK’s biggest supermarket by market share has lost 11% of its value in 2022. That’s not horrific and it’s up 15% over 12 months. However, a bog-standard FTSE 100 tracker would have given me a better return.
Whether a trading update on 17 June can turn things around is questionable. We know that grocery prices have been soaring, causing consumers to reconsider what they eat and where they shop. As such, I can’t see competition in this sector becoming any less fierce (think German discounters).
At 12 times forecast earnings, I’d say some of this is already factored in. The biggest draw here, however, is the 4.1% dividend yield. So, if I were investing purely for income today, Tesco would definitely be on my shortlist.
For capital growth, I’d look elsewhere.
Associated British Foods
Associated British Foods (LSE: ABF) completes my trio of cheap FTSE 100 shares down to report next month. Like most retailers, the owner of Primark has found things tough of late. The shares are down 31% in a year.
Despite this, I see a lot to like. If any clothing retailer is likely to get through a recession relatively unscathed, it’s one at a low price point. On top of this, ABF benefits from a diversified business model that also includes ingredients, sugar, agriculture and grocery.
Then there’s the valuation. A P/E of 13 looks good value. The shares also come with a secure-looking 2.9% dividend yield.
On the flip side, I doubt a trading update on 20 June will be brilliant. The company has already signalled the need to “implement selective price increases” at Primark. Raw materials costs will also be biting.
Again, I’d be inclined to drip feed my money in here rather than going ‘all in’.
