The last calendar year was a disappointing one for FTSE 100 shares. While US and European share indices were rising by double-digit percentages, worries about weak economic growth caused UK shares to largely disappoint.
The Footsie rose just 3.8% over the course of 2023. However, analysts think that British blue-chip stocks could charge higher during the new year.
Why the FTSE 100 could soar
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Take Susannah Streeter, for example, who’s head of money and markets at Hargreaves Lansdown. She comments that “the FTSE 100 remains undervalued compared to its global peers and looks set to recover in 2024.”
She says that:
- Interest cuts are likely later this year as inflation falls, providing a boost for discretionary stocks and housebuilders
- Possible rate cuts will also help banks, as falling net interest margins (NIM) will be offset by reduced fears over loan impairments
- Hopes of an economic ‘soft landing’ in the US should aid commodity stocks
- Conflict in the Middle East and OPEC+ supply cuts might bolster energy prices, and by extension oil stocks
In another promising sign for the Footsie in 2024, Streeter notes that “the circling of private equity firms over the index, pouncing on choice names, is a sign that UK listed companies could be good candidates for a resurgence in valuation.”
3 top bargain stocks
Coca-Cola Hellenic Bottling Company is one cheap FTSE stock I like right now. It currently trades on a forward price-to-earnings (P/E) ratio of 12 times, well below its historical average in the high teens/early 20s.
Chart created with TradingView
Despite the problem of higher costs, the supreme pricing power of its drinks — along with its expertise in terms of product innovation — still allows the company to reliably grow earnings over time. While profits are never guaranteed, City analysts are expecting the firm’s bottom line to rise another 9% in 2024.
I also like the look of BAE Systems. Orders have been flowing in as the geopolitical landscape has worsened, and the defence stock’s order backlog hit a record £66.2bn as of last June.
Strong trading is likely to persist as the world embarks on a new arms race. So despite the threat of project delays, analysts expect annual earnings to increase another 8% this year.
Chart created with TradingView
I also like BAE Systems because it its ultra-low valuation. As the chart above shows, its forward P/E ratio of 15.9 times sits well below those of industry peers including Lockheed Martin, Northrop Grumman, General Dynamics and RTX.
GSK is the final cheap growth stock I’m considering buying in 2024. That’s despite the expensive and unpredictable nature of drugs development.
Revenues growth here is accelerating rapidly (up 10% in the third quarter, on an underlying basis). This has led the company to recently hike its profits forecasts, and more upgrades could come as sales of its vaccines in particular take off.
City brokers think earnings will continue rising and increase 2% in 2024. This leaves GSK shares trading on a forward P/E ratio of just 9.5 times, below the FTSE 100 average of 11 times.
