3 cheap shares that missed the recent FTSE rally and still look great value to me

Harvey Jones is on the hunt for cheap shares that look good value despite the recent FTSE 100 rally, and these three have caught his eye.

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The FTSE 100 is within touching distance of 8,000. But it still contains plenty of super-cheap shares, and that’s my favourite type.

I’m surprised to see Barclays (LSE: BARC) trading at a lowly valuation of just 6.8 times earnings with a price-to-book value of just 0.4. The stock has actually put on a spurt lately, jumping 23.13% over three months, and 27.17% over 12 months.

I think investors have been treating the FTSE 100 banks with undue suspicion, given that they’re turning into money-making machines again. In February, Barclays posted a 6% drop in pre-tax 2023 profits, but still made £6.55bn.

Top value stocks

It cheered investors by announcing £2bn of gross efficiency savings by 2026. And it plans to return at least £10bn to shareholders, through dividends and share buybacks.

Barclays remains a big, sprawling operation, and under-fire CEO CS Venkatakrishnan has a tough job turning it round. His job may get harder if interest rates start falling, as that will squeeze margins. Yet with a long-term view, and a forecast yield of 5.2% covered 3.5 times by earnings, I’m keen to add it to my portfolio when I have the cash to spare.

The BP (LSE: BP) share price has laboured over the last year, falling 3.96%. This was probably inevitable, as the energy price shock eased. The stock has climbed 8.47% in the last month, though, as Middle East tensions lifted by the oil price. Yet it still looks cheap trading at 7.37 times earnings.

BP appears to have seen off the immediate threat from the net zero energy transition. It’s clear that switching to renewables will take time. But the oil price could fall if Gaza tensions ease (as wel all hope) or the global economy stutters, while BP’s yield isn’t what it was, at 4.42%.

However, this is a cyclical stock, and I’d rather buy when it’s down rather than up. Which seems to be the case today.

Another recovery play

The housebuilding sector missed out on the recent FTSE 100 surge, as property prices dip and hopes of an interest rate cut recede. The Barratt Developments (LSE: BDEV) share price has fallen 15.02% over three months, and is roughly flat over the year.

Barratt’s share price has also been hit by the mixed response to its all-share takeover of smaller rival Redrow for £2.5bn. The added uncertainty looks like an opportunity to me. The new group would have a combined valuation of more than £7bn, and a pipeline of 92,300 homes, plus £800m of net cash on its balance sheet.

The UK economy and property prices are still shaky, and house sales could remain sluggish if mortgage rates stay sticky. Also, there’s a risk that the Redrow merger could be torpedoed by regulators. Yet Barratt shares look dirt-cheap trading at just 6.9 times earnings. And I’d like to add them to my portfolio before they get more expensive.

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.

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays Plc and Redrow 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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