Last week was brutal for the stock market: London’s FTSE 100 lost 5.3% in five days. However, the US S&P 500 index rose 2.1%, offsetting losses for global investors. And some UK stocks fared much worse than others.
The FTSE 100’s biggest fallers
As a value investor, I like buying shares after they tumble. When Mr Market gets spooked, he sometimes offers me stocks at bargain-basement prices.
I don’t buy just any knocked-down shares, however. What I look for are quality businesses with share prices hit by selling pressure. I call these deeply discounted stocks ‘fallen angels’ — and there are plenty of them currently.
These were the FTSE 100’s biggest losers last week:
| Company | One-week change | One-year change | Five-year change |
| Legal & General | -13.9% | -18.0% | -13.5% |
| Shell | -14.0% | 12.7% | 1.0% |
| Barclays | -14.6% | -18.7% | -32.6% |
| Ashtead Group | -15.2% | -11.3% | 142.5% |
| M&G | -18.1% | -17.8% | * |
| Standard Chartered | -18.2% | 26.6% | -17.6% |
| Prudential | -21.2% | -5.9% | -39.9% |
My table is dominated by financial firms. As this latest market slide was triggered by the failure of two mid-sized US banks, this is hardly surprising.
Still, it’s hard to accept that rescuing two highly tech-exposed US banks should trigger such steep falls in these UK stocks. Indeed, I regard the above asset managers — Legal & General Group, M&G, and Prudential — as among the most ‘boring’ blue-chip shares.
Then again, with a global banking crisis threatening to break out, shares in the UK’s Big Four banks took heavy hits last week. Hence the near-15% dive in Barclays shares and the 18%+ plunge in Standard Chartered stock.
I’d buy these cheap UK stocks
Having been investing since 1986, I experienced the carnage of the October 1987, 2000-03, 2007-09 and spring 2020 stock-market crashes. But these collapses taught me the value of buying when there’s blood in the streets — even if it’s my own.
For the record, my wife bought shares for our family portfolio in Barclays and L&G midway through 2022. After their recent declines, I’d gladly buy more of these two UK stocks if I had any cash to spare. Also, I view M&G as very undervalued and aim to purchase these cheap shares next tax year.
Here’s how these three FTSE 100 shares’ fundamentals stack up after Friday’s close (in A-Z order):
| Company | Share price | Market value | Price/earnings ratio | Earnings yield | Dividend yield | Dividend cover |
| Barclays | 139.56p | £22.1bn | 4.7 | 21.4% | 5.2% | 4.1 |
| L&G | 226.6p | £13.5bn | 6.2 | 16.1% | 8.6% | 1.9 |
| M&G | 177.8p | £4.2bn | ** | ** | 11.0% | ** |
To me, these three stocks look unfairly cheap. But now for the bad news. These figures are historic — or trailing — numbers. Hence, if this banking crisis worsens, all three financial firms could see their earnings tumble.
Furthermore, these businesses could suffer if the UK economy weakens or slides into full-blown recession. But the latest government forecast is for our economy to shrink by a mere 0.2% in 2023.
Summing up, these three dividend yields look pretty attractive to me as an investor seeking long-term income. What’s more, at two of the companies, cash payouts are covered several times by trailing earnings. So when I have the cash to buy more cheap UK stocks, I won’t hesitate to do so!
