Investors have the potential to earn market-beating returns in the long run by buying value stocks. Today, I think there are plenty of companies out there trading at bargain prices.
I’ve been looking through the FTSE over the last few weeks. I see a host of cheap stocks that I think could make strong additions to my portfolio.
My plan
My plan is rather straightforward. I want to buy shares that I think look undervalued today and keep hold of them for as long as possible.
Whether we’re in a bull or bear market, I don’t intend to deviate from my aims. I have a 30-year time frame. I’m aware I’ll experience bouts of volatility during it. I’m content with that being the case as I focus on the bigger picture.
A smart time to buy
With my plan in place, I think now could be a smart time to buy.
What the last few years have entailed has been incredibly challenging for retail investors. But I like to remain positive. I think we could, fingers crossed, be nearing the end of it.
As the year goes on, I’m optimistic we could see a boost in investor sentiment. This in turn should see share prices rise.
Interest rates will begin to drop from the current base rate of 5.25%. There are even some predictions that it’ll be at 3% by the end of 2025. Inflation will also continue to fall closer to the 2% target set out by the Bank of England. While it may not seem like it, I think there’s light at the end of the tunnel.
One I’m looking at
But what companies will benefit from this? A potential candidate is JD Sports Fashion (LSE: JD).
If I had purchased shares in the retail giant at the beginning of the year, I’d be sitting on a 26.6% paper loss. Luckily, I didn’t. But now I think its share may be too cheap to ignore.
Today, it trades on a forward price-to-earnings ratio just shy of nine. To me, that looks cheap.
JD is a leader in the retail space. And it continues to expand. It opened over 200 new stores last year, including in multiple flagship locations. It has pumped larger investment into supply chains. The business also has a healthy balance sheet.
Its share price has struggled as it has faced numerous challenges recently. A profit warning back in January sent it tumbling. With inflation pinching the wallets of consumers, it could be argued that the last thing they’ll be doing is splashing out on new goods.
But should this be of concern to an investor like me? The stock has experienced a blip. But I’m confident it can perform over the long run. Consumers may not be willing to spend at the moment. However, premium athleisure goods have been rising in popularity, and it’s forecasted they’ll continue to do so.
I think there’s large scope for recovery with JD. If I had some spare cash, I’d snap up some shares.
