With £1,000, I’d buy these 2 dirt-cheap FTSE 100 shares

Although the FTSE 100 has outperformed other global indexes, there are still several bargains in its ranks. Here are two of my favourites.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

In the past year, the FTSE 100 has managed to rise over 7%, making it one of the top-performing indexes in the world. For instance, in the same period, the Dow Jones has sunk over 4%, the Nasdaq has dropped 11% and the Hang Seng has plummeted 28%. However, despite this outperformance, many FTSE 100 shares still seem too cheap to me. Here are two that pique my interest at the moment. 

A beaten-down airline 

It’s been an incredibly difficult environment for travel companies over the past couple of years, as travel restrictions have also come with limited demand. This has resulted in many airlines posting huge losses and having to resort to equity and debt issuances to survive. IAG (LSE: IAG) was one of the worst-affected, with its share price falling 80% since the start of the pandemic. Over the past year, it has dipped nearly 40%, far underperforming the FTSE 100. 

Although travel restrictions have mainly been lifted, many risks remain with IAG. Firstly, with the tragic war continuing in Eastern Europe, the oil price is showing no signs of slowing down. Although IAG has hedged a large percentage of oil, this will only mitigate some of the impacts, and company costs are still likely to soar. This may strain profit margins or force the firm to raise prices. Secondly, the coronavirus situation in China remains precarious, which may hinder the recovery. 

But I’m willing to disregard these risks for a few reasons. There are signs that travel is recovering, and in Q1, passenger numbers reached 65% of 2019 levels. By Q4, it’s expected that the firm can achieve levels of 90%. And the company expects to return to profitability in the next quarter. If it can achieve this, I believe the IAG share price could soar. Such optimism is the reason why I’d add IAG shares to my portfolio today. 

A FTSE 100 underperformer 

Despite its large portfolio of consumer goods, Unilever (LSE: ULVR) has underperformed the FTSE 100 as well. In fact, over the past year, it has sunk 12%. This has come after criticism of management strategy and the impact of inflation on the company’s cost base. However, although these are risks, I believe that the sell-off may now have been overdone. 

Unilever has continued to record growth, albeit at very low levels. For example, in 2021, underlying operating profits were able to increase 2.9% year-on-year to €9.6bn. This enabled the company to announce a €3bn share buyback programme for 2022-23, a factor likely to boost the Unilever share price. 

Tuesday’s news that activist investor Nelson Peltz is joining the Unilever board is also seen as a very good sign by some. This is because he’s expected to shake up operations, which may include management changes. Peltz also has experience at consumer goods companies Procter & GambleHeinz and Mondelez, where he helped make important changes. If he can do the same at Unilever, higher profits and shareholder returns could result. Therefore, Unilever is another FTSE 100 stock I’d buy at current prices. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Stuart Blair has no position in any of the shares mentioned. The Motley Fool UK has recommended Unilever. 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.

More on Investing Articles

Close-up of British bank notes
Investing Articles

Here’s how I’d invest a £20K Stocks & Shares ISA to target £1,600 in dividend income every year

Our writer gets into the nitty gritty of how he would aim to build sizeable passive income streams from a…

Read more »

Investor looking at stock graph on a tablet with their finger hovering over the Buy button
Investing Articles

2 reasons why I’m loading up on FTSE 100 shares

This Fool thinks FTSE 100 shares look cheap. With that, he plans to continue snapping them up today. Here's one…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Why wait? I’d buy FTSE 100 shares now before the next stock market rally!

Our writer explains why he'd snap up what he sees as bargain FTSE 100 shares now rather than waiting in…

Read more »

Investing Articles

Is it time for me to change my tune about Rolls-Royce shares?

This Fool has steered clear of buying Rolls-Royce shares. But after its recent performance, he's reconsidering his stance. Here's why.

Read more »

Investing Articles

Aviva share price: 3 reasons to consider buying for 2024

The Aviva share price is still lower then when I bought some nearly a decade ago. Here's why I'm thinking…

Read more »

Front view photo of a woman using digital tablet in London
Investing Articles

These 2 shares could bank me £328 a month in second income

Jon Smith runs through two FTSE stocks that have above-average dividend yields that could pay out a generous second income…

Read more »

Stack of one pound coins falling over
Investing Articles

This passive income plan is simple – but could earn me thousands!

Christopher Ruane explains how putting a fiver a day to work in the stock market might help him earn thousands…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on

After record profits, are Lloyds shares a buy, sell, or hold?

As Lloyds pulls in pre-tax profits of £7.5bn, boosts its dividend, and continues to repurchase shares, are the company’s shares…

Read more »