As a value investor I’m always looking for oppotunities to buy beaten-down bargains. So a sudden fall in the value of many FTSE 100 shares in recent days has grabbed my attention.
Mounting concerns over China’s economy have driven the FTSE’s fresh decline. But I’m confident that the index will eventually recover, and that individuals who invested at current levels could make a packet. It’s a strategy that billionaire investor Warren Buffett has used to build his incredible wealth.
2 FTSE shares on my radar
The past isn’t always a reliable guide to what comes next. However, history shows us that economic crises come and go, and that stock markets always bounce back strongly following periods of weakness.
With this in mind, here are two FTSE 100 stocks I’m thinking of buying today. I believe they could soar in value over the next decade.
1. Rio Tinto
Property firm Evergrande’s claim for US bankruptcy protection shook the share prices of mining stocks again last week. The application has reignited fears over China’s property sector and darkened the outlook for future commodities demand.
Rio Tinto (LSE:RIO) is one of many metals producers whose share prices have toppled in the gloom. The company’s reliance on iron ore — a key steelmaking ingredient — to drive profits leaves it especially vulnerable to a construction industry collapse.
But at current prices I still find the FTSE share very attractive. Not only does it trade on a forward price-to-earnings (P/E) ratio of 8.6 times, it also carries a mighty 7% dividend yield at a current price of £45.65.
At these levels, I think the threat of a sharp slowdown in Chinese commodities demand is baked in. In fact, continued monetary support from Beijing suggests that a painful downturn could be averted altogether.
I think Rio Tinto shares are attractive for long-term investors like me. As the green economy takes off, demand for industrial metals could rise strongly over the next decade. Rapid emerging market urbanisation and rising digitalisation could also push commodities consumption skywards, pulling Rio’s share price with it.
2. Aviva
Financial services giant Aviva (LSE:AV.) is another bargain stock I have my eye on. At 380p per share, it trades on a P/E ratio of 9.1 times for 2023. And it carries a FTSE 100-beating 8.8% dividend yield.
The company’s low valuation reflects fears over falling product demand as the UK economy struggles, as well as concerns about continued weakness at its investment division as stock markets fall.
However, I’m backing Aviva (and its share price) to bounce back. Over the long term, revenues should rise strongly as people become less reliant on the state to fund their retirement and healthcare. As Western populations rapidly age, demand for its wealth, protection, and retirement products could in fact boom.
I’m also encouraged by the steps the firm’s taking to digitalise its operations. This — along with its impressive brand power — could give it the edge in what will remain a highly competitive sector.
Like Rio Tinto, I think it could be too cheap to miss today.
