I’m building a list of the best FTSE 100 and FTSE 250 value stocks that I should buy for next year. So I’m taking another close look at housebuilder Vistry Group (LSE:VTY) and global mining giant Glencore (LSE:GLEN).
Each of them trades on a forward price-to-earnings (P/E) ratio below the Footsie average of 12 times. On top of this, they both carry a prospective dividend yield north of the 4% average for FTSE shares.
But which one is a brilliant bargain, and which should I avoid like the plague?
FTSE 250 housebuilder Vistry trades on a forward P/E ratio of 9.6 times and carries a corresponding 5% dividend yield.
This multiple makes it cheaper than many of its UK-listed peers, which may come as a surprise to some given its focus on affordable housing. This segment tends to be more stable during economic downturns.
Yet despite this value I’m not tempted to buy the company’s shares today. The homes market looks set to remain under pressure for some time — Lloyds has said it expects property prices to keep falling all the way through to 2025. At the same time, build cost inflation is heaping pressure on margins.
Vistry last month said that the private home sales has remained “subdued” despite an increased use of incentives. It added that “we have not seen the seasonal increase in private sales since September that we had expected”.
As a result, Vistry sliced its full-year profits for 2023. I think more disappointing updates could be coming over the short to medium term, too, as the UK economy struggles and interest rates likely remain above historical norms.
I think housebuilders like this have excellent long-term investment potential. But the prospect of a sliding share price and lower-than-predicted dividends next year make this UK share one I will avoid.
I think snapping up some Glencore shares for my portfolio could be a better idea. The miner trades on a forward P/E ratio of 10.5 times. And it carries a mighty 7% dividend yield.
It’s not just this gigantic yield that makes the FTSE 100 firm a superior buy in my opinion. I think demand for its products could hold up better despite the uncertain global outlook.
Strong imports of key commodities from China suggest that fears over mining industry profits might be exaggerated. Iron ore imports, for instance, were up 6.5% between January and October. And last month copper purchases hit their highest since the start of the year.
That’s not to say that trouble won’t come down the line, of course. Further stress in the real estate and manufacturing sectors could sap industrial metals demand.
Still, I think this threat is already baked into Glencore’s share price. And as a long-term investor, I think now could be a good time to buy. The mining giant’s shares could soar from current levels as phenomena like the growing green economy and the digital revolution turbocharge metals demand.