2 FTSE shares I’m desperate to buy before the next stock market rally

I’m purchasing a spread of cheap FTSE 100 shares in preparation for the next big stock market rally. These two high-yielders tempt me.

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I love a stock market rally as much as the next investor, but they also make me nervous. It means all the shares I want to buy suddenly become that bit more expensive. Personally, I prefer picking up shares before they rally, when they’re still cheap.

Next time the FTSE 100 goes up, I expect the following two stocks to spring back into life. Since I have no idea when the next bull run will arrive, I’d better not leave it too long to buy them. These things are impossible to time.

Ready for a bull run

Media, analytics and advertising giant WPP (LSE: WPP) has had a rough few years and the pain isn’t over yet. Its shares are down 22% over the past 12 months. Companies like this one rely on a buoyant economy and free-spending corporates, and we haven’t seen that for some time. When companies are under pressure and the bottom line is stretched, cutting ad spend is all too easy (even if it may be a mistake).

WPP has also had to rebuild itself following the acrimonious departure of founder Sir Martin Sorrell. However, it has excited investors by hooking up with Nvidia to produce an AI-driven content engine to enable creative teams to produce commercial content faster.

2023 revenues grew a modest 2.9% on a like-for-like basis to £14.85bn, despite $4.5bn of net new business including from big-name clients such as Allianz, Krispy Kreme, Mondelēz, Nestlé, PayPal and Verizon. What the company needs now is an economic recovery. Don’t we all.

I remain optimistic, but also have to be patient. I’m keen to buy WPP at today’s modest forward valuation of 10.7 times earnings. Especially since this gives me a handsome forward yield of 5.17%. Dividends aren’t guaranteed, growth isn’t assured. Hence the bargain price.

Another cheap FTSE 100 share

Fund manager Schroders (LSE: SDR) has also been out of favour for ages, and even missed out on the recent short-lived FTSE 100 rally. Its shares are down 17.39% over the last 12 months, and full-year results published on 21 March did little to cheer investors.

Schroders’ annual profits fell 8.58% to £723m, with a tiny 1.78% rise in assets under management to £750.6bn. The board said the sector has endured “one of the most challenging years in recent times”, with a “turbulent” macroeconomic backdrop, volatile markets and geopolitical unrest. That looks like a ‘buy’ signal but only for those who, like me, are willing to take a long-term view.

The stock looks fair value trading at 15.2 times trailing earnings, with a high forecast yield of 5.9%, adequately (but not brilliantly) covered 1.5 times. Investors haven’t enjoyed much dividend growth lately, with the 2021 dividend per share of 21.4p increased only marginally to 21.5p in 2022 and frozen at that level in 2023.

Investors are wary, understandably so. The shares trade lower than they did a decade ago, albeit with peaks and troughs along the way. What Schroders needs is a jolly good bull market. I just can’t say when we’ll get one. Given that I want to be holding its shares when we do, I’ll have to take a chance and buy it soon.

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 Nvidia and Schroders 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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