Many top FTSE 100 and FTSE 250 stocks have plunged in value during March. This gives me, as a long-term investor and lover of value shares, a great opportunity to load up on bargains.
Here are two I think are great bargain buys at the moment. They carry a combination of low price-to-earnings (P/E) ratios and big dividend yields.
Anglo American
Earnings at diversified miner Anglo American (LSE:AAL) remain under threat in 2023 as central banks keep hiking rates. The impact of this on global growth could take a big bite out of demand for raw materials.
Yet I still believe the metals giant is a top stock to buy. Sales of its products look set to soar over the next decade as the next commodities supercycle begins. Incidentally, it’s why I own shares in another mega miner, fellow FTSE 100 share Rio Tinto.
Anglo American can expect demand for its copper and nickel to grow as electric car adoption booms. Consumption of its iron ore should also rise as urbanisation in emerging markets increases and infrastructure spending in the West picks up. Growing demand for fertiliser too, means demand for its polyhalite could be white hot.
I think buying large mining companies like this is a great way to get exposure to the sector. Their huge balance sheets give them the strength to ride out potentially-long industry downturns. They also give them an opportunity to better invest for growth.
Today, Anglo American trades on a forward P/E ratio of 7.4 times. It also carries a market-beating 5.4% dividend yield. This sort of all-round value makes it a top buy in my book.
Babcock International Group
A bright outlook for the defence market suggests Babcock International (LSE:BAB) could be a wise investment for the next decade. Weapons spending in the West looks set to keep climbing as worries over Chinese and Russian expansionism mount.
This FTSE 250 company is well-placed to capitalise on rising arms budgets. Its services include providing ship equipment, managing the British Army’s tank fleet, and training pilots.
Babcock is already thriving in this period of heightened geopolitical tension. Further major contract wins last year pushed its contract backlog to a meaty £9.9bn as of September.
Project delays and high-profile systems could derail its ability to win future business. But, encouragingly, the company has a great track record on this front. It’s why it continues to receive significant contracts from the Ministry of Defence and from overseas customers.
Today, the company trades on a P/E ratio of just 8.2 times for the new financial year beginning in April. Interestingly, it also carries a price-to-earnings growth (PEG) ratio of 0.3. Any reading below 1 suggests that a stock is undervalued.
With the business also carrying a 4% dividend yield I believe it’s a top value stock for investors to buy.
