FTSE 100 shares had a rough week last week. Then on Monday, the top London index tumbled further.
Never mind the 8,000 points the Footsie so recently reached. We’re now heading back down close to 7,500. Are we lurching towards a new stock market crash? I don’t think so.
The main thing is not to panic. The FTSE 100 has lost about 6% since reaching its all-time high last month. And it’s now at levels last seen… in January. You know, just a couple of months ago.
That’s not much of a setback at all, really. And it’s making a lot of cheap FTSE 100 shares look dirt cheap to me right now.
Cheap bank
Barclays (LSE: BARC) shares fell 6% on Monday, more than any of the other UK banks
That might be due to its US exposure, after the failure of two banks there. The other UK banks look safer from American woes.
The Barclays price-to-earnings (P/E) ratio is down to just 5.2 now. That’s way less than half the FTSE 100 average. And forecasts see it falling to around 4.5 next year. That just seems crazy cheap to me.
But there’s more. A falling price pushes up dividend yields. And analysts now put it above 6% for 2024. That’s some way out. But the long-term banking outlook is what counts.
Now, we might face a new banking crisis. That’s always possible. But I think the chances are slim.
Insurance
Legal & General (LSE: LGEN) lost more than 4% on Monday. I already thought it was cheap, and now I think it’s even cheaper.
I expect some of the weakness comes from Direct Line, which slashed its dividend this year. The stock has crashed 40% in the past 12 months. And that’s sent shivers across the whole of the sector.
But the insurance business is based on uncertainty. And when, like now, the market has pushed shares down, I make that time to buy.
We’re looking at a forward P/E of eight now. That’s not as low as Barclays, but I still see it as very cheap.
The forecast dividend yield has reached 7.5%, though it has to be at risk. Legal & General hasn’t cut its dividend in the past decade, though.
Super cheap?
Talking of low value, how about Centrica (LSE: CNA) on a P/E of under five? The owner of British Gas has seen its shares climb since 2020. But they’re still down 25% over five years.
In a year of high fuel prices, why are Centrica shares so unloved? Maybe investors are scared of gas getting cheaper again.
There’s a £300m share buyback going on now to return surplus cash. So the Centrica board appears to think its shares are cheap, going that route rather than a special dividend.
Oil and gas production is profitable. But the retail business is competitive and works on thin margins. The balance between those two sides makes things less certain.
But overall, I think Centrica is cheap at today’s price.
