With the stock market undergoing a fairly massive correction, plenty of FTSE 100 stocks have tumbled. But as unpleasant as the last couple of months have been, the underwhelming performance of these businesses has seemingly created buying opportunities. Even more so now that forecasts predict a recovery is on the horizon.
According to analysts at The Economy Forecast Agency, the FTSE 100 will reverse its downward trajectory and even surpass 8,000 points by December 2023. If accurate, time may be running out to capitalise on cheap valuations.
With that in mind, here are two businesses I believe are bargain buys for my portfolio today.
A thriving FTSE 100 kitchen designer
As boring as investing in a fitted kitchen supplier sounds, Howden Joinery (LSE:HWDN) has been reporting some fairly exciting results. Looking at its 2022 half-year results, revenue is up 16.3% year-on-year and 39.9% versus pre-pandemic levels.
But what’s even more impressive is management’s successful expansion of operating profit margins. As a result, operating income in the last six months surged by 20% versus 2021 and is up by a whopping 91.9% against 2019!
Needless to say, those are pretty stellar results, especially considering consumer spending has been declining because of rising inflation. Having said that, there remains the possibility of growth disruption if the UK falls into a recession. After all, high inflation and higher interest rates don’t exactly paint the ideal environment for consumers to renovate their kitchens.
But it seems fears of a slowdown are already baked into this FTSE 100 stock’s price. Shares are down 25% over the last 12 months and are now trading close to the bottom of their 52-week range. When comparing these growth figures to a meagre P/E ratio of 12.7, I can’t help but feel this is a bargain opportunity for my portfolio. Even more so now that management has just raised dividends again.
A recession stock to own today?
Another FTSE 100 business to have been hit hard lately is B&M European Value Retail (LSE:BME). The stock tumbled by almost 27% over the past year after management released “disappointing” earnings. Yet, on closer inspection, I think investors may have over-reacted.
In May, the company released its preliminary results for its 2022 fiscal year ending in March. And on the surface, things didn’t look all that great, with both revenues and profit growth stagnating. To make things worse, a few months later its 2023 first quarter trading update showed similar lacklustre performance.
But as frustrating as this is to see, I’m not concerned. When the pandemic triggered lockdowns, B&M managed to continue operating as an essential store while its competitors were forced to close. This resulted in a rush of new income that was clearly unsustainable once its peers re-opened for business. So while growth might have flatlined, it’s important to realise the comparable periods were quite exceptional.
Yet moving forward, trends may start climbing again. The firm continues to roll out new stores to increase its addressable market. And its newly established operations in France are thriving, delivering double-digit growth putting UK operations to shame.
With demand for discount retailers on the rise courtesy of inflation, adding this beaten-down FTSE 100 stock to my portfolio could be a lucrative move. At least, that’s what I think.
