I’m searching for the best FTSE 100 value stocks to add to my Stocks and Shares ISA this month. Here are two cheap shares I’ll be looking to buy if I have spare cash to invest.
The Berkeley Group
Blue-chip homebuilder The Berkeley Group (LSE:BKG) offers brilliant all-round value right now. It trades on a forward price-to-earnings (P/E) ratio of 11.5 times. The firm carries a 5.7% dividend yield.
Housebuilder shares are famous for the huge dividends they’ve paid in recent times. But as interest rates rise and homebuyer affordability is strained, the level at which these businesses will pay dividends going forward is highly uncertain.
Building society Nationwide said this week that house prices dropped 3.4% in May. This was the biggest annual decline for 14 years.
But on the whole, industry data of recent months suggests a market in a state of steady recovery. That Nationwide survey also showed house prices were largely unchanged month on month (down just 0.1%). Property listings provider Zoopla also said this week that “the rate of price falls has now slowed”.
Berkeley’s focus on London and the South-East provides another reason to be optimistic. This is because housing market activity in the capital is improving especially strongly. This was up 10% in May, according to Zoopla.
Trading updates among the UK’s listed housebuilders have been encouraging since the start of 2023. And there’s a good chance Berkeley could put out more promising numbers of its own when full-year results come out on 21 June. Now could be a good time to buy its shares.
SSE
Energy generator SSE (LSE:SSE) is another cheap share on my radar this month. It trades on a forward P/E ratio of just 12.7 times, below the average of 14.5 times for FTSE Index shares.
I think this is a steal in the current uncertain climate. Economic conditions in the UK look set to remain tough for some time. But electricity producers like this needn’t worry as demand for their services will remain broadly unchanged.
I also think the wind energy specialist is a bargain given the positive outlook for renewable energy demand. Companies like this will play a vital role in helping Britain meet its net zero targets. And the business is accelerating its investment in green energy to fully capitalise on this opportunity. It plans to increase renewable energy output fivefold in the eight years to 2030.
On the downside, tough planning rules for onshore wind farms could hamper SSE’s growth strategy. News that Ukraine has built more land-based wind turbines than the UK over the past year — even in spite of invasion from Russian troops — illustrates the seriousness of the problem.
However, there’s a good chance such laws will be watered down as the climate emergency worsens. And this will give the likes of SSE extra wiggle room to grow profits. Government plans to wean the country off Russian oil could also prompt a rethink in planning regulations for the green energy industry.
On balance I think both SSE and Berkeley are top bargains to buy this month.
