I’m building a list of the best FTSE 100 value shares to buy for my Stocks and Shares ISA. Here are two I’m aiming to increase my holdings in during the coming weeks.
Diageo
Diageo‘s (LSE:DGE) share price has turned higher more recently. But it’s still a whopping 17% lower than it was 12 months ago. This is why I’m considering buying more in my ISA (I last increased my stake over the summer).
The Guinness, Smirnoff and Captain Morgan brands owner isn’t quite on the ropes. But trading has deteriorated markedly due to problems in its Latin America and Caribbean (LAC) territory in the six months to December. And continued weakness could prove a big problem for the FTSE firm.
As analyst Aarin Chiekrie of Hargreaves Lansdown comments: “Improvements in the Latin American and Caribbean market will be key to future margin expansion.“
But I’m not losing any sleep over this. Diageo has experienced regional problems before, such as in China during the 2010s when an anti-corruption drive hammered sales of its premium products.
I’m confident it will bounce back strongly again from its current travails. The firm’s large emerging market exposure provides excellent profits-growing potential as disposable income levels rise. Successful investment in fast-growing areas like non-alcoholic and premium brands also bodes well.
It’s also important to remember that trading in Diageo’s other regions remains strong. Aggregated organic net sales in Asia Pacific, Africa, North America and Europe rose 2.5% between July and December.
I think the slump in Diageo’s valuation is unwarranted. And I’m looking to capitalise on this when I next have cash to invest. Its forward price-to-earnings (P/E) ratio of 18.5 times represents a bargain, in my book.
Aviva
Financial services provider Aviva (LSE:AV.) has fallen by an even larger 23% the past 12 months. This means it trades on a rock-bottom P/E ratio of 9.7 times for 2024. It also carries a mighty 8.1% dividend yield.
On the one hand, I’m not attracted by Aviva’s rather limited geographic footprint. Today, it only has operations in the UK, Ireland and Canada following years of asset sales. If economic conditions in Britain remain tough, the company could have a real struggle on its hands to grow profits.
Yet I believe the potential benefits of owning Aviva shares outweigh this risk. The business — which has around 18m global customers on its books — can expect to continue growing its client base as populations rapidly age across its markets. This phenomenon should drive long-term demand for its retirement, protection and investment products.
I also like the life insurer because of its cash-rich balance sheet. This gives it the firepower to launch more earnings-boosting acquisitions if it so chooses. It also means the company looks in good shape to continue growing dividends and engaging in share buybacks.
A strong balance sheet enabled Aviva to repurchase £300m of its shares in the first half of 2023. The firm also raised last year’s interim dividend by a healthy 8%.
I first opened a stake in the FTSE firm in October. Its enduring value means I’m hoping to add more to my ISA in the near future.
