The FTSE 100 has made a strong move forward, jumping nearly 4% in a week. Since the second week of October, the Footsie has gone up a whopping 7.4%. This strong month of trading is the trend reversal I have been looking for before looking for bargains. Right now, some blue-chip FTSE 100 shares look very cheap and ready for liftoff. Here are two names from my watchlist that look ripe for picking before 2023.
Dirt-cheap energy share
SSE (LSE:SSE) is an energy company that operates wind farms and hydroelectricity units. It has become a key part of the UK’s push to make renewable energy more affordable and accessible.
The energy industry has undergone a drastic shift over the last two years. Oil prices have remained close to the $100-mark throughout 2022. This has increased the demand for renewables and I am keen on investing in an FTSE 100 green energy share.
SSE has been growing its wind energy reserves recently. In the first quarter (Q1) of 2022, the company was 5% ahead of energy generation targets. Compared to Q1 2021, output increased by 24% year on year.
SSE also expects adjusted earnings per share of at least 120p this year factoring in expenditures and investments in excess of £2.5bn. This shows me that the company is healthy financially despite sizable acquisitions.
SSE shares are currently trading at 1,592p at a price-to-earnings (P/E) ratio of just 6.6 times. The FTSE 100 stock also comes with a sizable dividend yield of 5.3% making it a growth option for my portfolio that also offers a lot of value.
The energy sector is expected to undergo a major shake-up given skyrocketing profits. The recently announced de-facto windfall tax on renewables will cut earnings significantly. But this is not a permanent move.
While revenue will drop momentarily, the industry will continue to gain prominence. I think this is the best period for me to invest in renewable energy in the UK. Once the taxes are lifted, earnings will grow, attracting more investor interest. And I am looking to capitalise before this happens.
Telecom giant with growth potential
Airtel Africa (LSE:AAF) shares have been on my watchlist for a while. Owned by Indian giant Bharati Airtel, this FTSE 100 company offers mobile connectivity and digital payment software in 14 major countries across Africa.
In fact, Africa is a global leader in digital payments and Airtel Money offers comprehensive digital fund transfer solutions, empowering low-income communities. The company is growing its offering by securing more 4G licences and is well positioned to be a 5G giant in the continent.
Despite a 20% jump in earnings this year, its shares are down 13% this year. It is trading at a P/E ratio of 8.1 times with a dividend yield of 3.6%. To put this context, Airtel Africa shares are up over 240% since the first pandemic crash.
Expansion and the switch to 5G will prove to be cash-intensive. This could drop earnings over the coming months and years depending on when frequency bands are offered to private firms.
However, I am bullish on the firm’s tested business model and steady recent revenue growth. It currently looks attractive but I am waiting to see price action towards the end of the year before making an investment.
