UK stocks are hitting all-time highs! Yet these 2 still look cheap to me

The FTSE 100’s on a roll. But it’s still possible to pick bargain UK stocks, provided we know where to look, says Harvey Jones

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UK stocks have had a brilliant run lately, with the FTSE 100 smashing past one all-time high after another.

Usually, I prefer to buy shares when markets are down and prices are cheap, which isn’t the case today, obviously. Yet I still think the UK stock market contains plenty of great value companies worth buying today.

The FTSE 100 still trades at a modest 13 times earnings, a discount of a roughly a third to global equities, according to Evelyn Partners. They’re well below their long-term median valuations.

FTSE 100 value shares

I’ve been scouring the index for top value stocks and recently bought these two apparent bargains. I think they’re still worth buying today. 

For years, I watched helplessly as the JD Sports Fashion (LSE: JD) share price smashed it. I concluded I’d missed my chance to buy the branded sportswear retailer, only to see it fly even higher.

Then, on 4 January, its shares crashed 20% as disappointing festive trading triggered a profit warning. I waited for the dust to settle and bought them inside my Self-Invested Person Pension (SIPP) on 22 January.

I like buying good companies on bad news but I’ve learned one hard lesson. Turning things round takes time. I didn’t expect an instant revival. My stake has crept up just 3.25% so far, but it’s early doors.

Now I’m tempted to buy more. The JD Sports share price is down 24.27% on a year ago and looks good value, trading at just nine times earnings.

The risk is that I’m living in the past. Just because JD Sports was a stock market darling once, doesn’t mean it will be again. It may have overshot before, and is now trading at more realistic levels.

There’s another danger. As well as selling own-branded items, it has lucrative tie-ups with huge international brands, such as Nike and Adidas. If these giants chose a different route to market, JD may never recover.

However, with the cost-of-living crisis easing, I’m hoping shoppers will start upgrading their athleisurewear, boosting JD’s sales. I think the potential rewards outweigh the risks.

Buying bargain equities

On 4 March, I added FTSE 100 pharmaceutical group GSK (LSE: GSK) to my SIPP. Its shares also looked cheap, trading at around 10 times earnings.

In its former incarnation, GlaxoSmithKlein, this was one of the most popular dividend growth stocks on the entire index, with a solid yield of 5-6% a year. Unfortunately, CEO Emma Walmsley has struggled to emulate the success of Pascal Soriot, CEO of rival drugmaker AstraZeneca, in reviving the company’s drugs pipeline.

Spinning off consumer health business Haleon in July 2022 has raised cash and concentrated minds, and the outlook’s brighter after a string of optimistic drugs trials. The risk, as ever, is that new treatments fail to match old ones that lose exclusivity.

The GSK share price is up an impressive 23.33% over the last year. My holding’s up 4.39% after a solid start. The shares still look good value trading at 12.7 times earnings.

GSK’s forecast 3.47% yield’s only marginally above the FTSE 100 average. In 2025, markets expect 3.6%, a modest uplift. I’m not expecting instant riches here. GSK looks like a slow burner, but at today’s low price, I’d happily buy more.

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 positions in GSK and JD Sports Fashion. The Motley Fool UK has recommended GSK. 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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