Why I’d ignore Lloyds’ cheap share price and buy these FTSE 100 bargains

I’m unmoved by the cheapness of the Lloyds Banking share price today. Here’s why I plan to snap up other FTSE 100 value stocks for my portfolio instead.

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The Lloyds Banking Group (LSE:LLOY) share price remains under pressure at the start of 2024. Investor continue to be spooked by the prospect of further heavy impairments and weak revenues growth as the British economy splutters.

News last week that Lloyds has set aside £450m to cover a fresh regulatory probe has further raised the gloom surrounding the bank. The Financial Conduct Authority (FCA) is investigating claims of mis-selling in the motor finance industry. Some commentators predict this could be a re-run of the personal protection insurance (PPI) scandal that cost banks tens of billion of pounds.

Fans of the FTSE 100 bank like its strong position in the market and the steady flow of income this provides. It’s a quality that helps the business pay above-average dividends on a regular basis.

But for the reasons I describe above — allied to the growing threat to its profits from challenger banks — I think investing in Lloyds shares is too big a gamble. That’s despite the apparent cheapness of its shares. The company trades on a forward price-to-earnings (P/E) ratio of 6.8 times, and carries a giant 6.9% dividend yield.

Here are three FTSE bargain stocks I’d sooner buy when I next have cash to invest.

Glencore

Mining companies like Glencore have slumped as worries over China’s economy have mounted. Debt problems in the country’s property sector and the slowing manufacturing sector in particular could damage commodities demand.

But the long-term outlook for these companies remains robust. Themes like the green energy transition, rapid urbanisation in emerging markets, and increased digitalisation should drive consumption of industrial metals much higher.

I also like Glencore because of its role as a mining business and a trading giant. This helps reduce risk to me as an investor. Today, the company trades on a forward P/E ratio of 10.6 times and carries a healthy 4.4% dividend yield.

SSE

Renewable energy specialist SSE is also well placed to thrive as demand for clean power takes off. Unfavourable weather conditions may affect profits on occasion. But over a longer time horizon this FTSE 100 share looks in good shape to thrive.

I like the company’s plans to supercharge investment in its wind farm network through to 2032. It intends to invest £40bn in green energy over the period to give earnings (and hopefully dividends) a shot in the arm.

For the upcoming financial year beginning in April, SSE trades on a P/E ratio of just 9.2 times. It also boasts a meaty 4.2% dividend yield.

Associated British Foods

Associated British Foods (LSE: ABF) is the final blue-chip value stock on my radar today. It trades on a forward price-to-earnings growth (PEG) ratio of 0.5.

A reminder that any reading below 1 suggests that a stock is undervalued. As an added bonus, Associated British Foods shares also provide a healthy 2.9% dividend yield.

The problem of cost inflation is likely to remain a problem for the retail sector this year at least. But I think the enormous long-term earnings potential of its major asset, fashion and lifestyle retailer Primark, still makes the company a top buy today. The value retail segment is poised to continue growing rapidly over the next decade at least. And Primark is rapidly expanding across Europe and the US to harness this opportunity.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Associated British Foods Plc and Lloyds Banking Group Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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