The FTSE 100 is jam-packed with top-quality bargains! Here are 2 I’m eyeing

This Fool has his eye on these two FTSE 100 constituents. Here he breaks down why he’s considering buying their cheap shares.

| More on:

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Some investors may question whether it’s still worth buying businesses on the FTSE 100 after seeing the index surge this year. I’m not one of them.

Scouring the UK-leading index, I still see plenty of top-quality companies trading on solid valuations that look like attractive investment propositions today.

We’re now into the second half of the year and while I’m expecting some volatility along the way, I’m still backing Footsie shares to keep up their fine form over the next six months and beyond.

I especially like the look of these two. If I had the cash, I’d strongly consider buying some shares this month.

Next

A stock I’ve been keeping close tabs on is Next (LSE: NXT). It currently has a price-to-earnings (P/E) ratio of 13.5. I think that’s good value for a business of its quality.

Next has already stated that it’s expecting sales for the rest of the year to slow down. In all fairness, we’re slap bang in the middle of a cost-of-living crisis, which has seen consumers cut back on spending. Other factors such as wet spring/summer weather are likely to harm sales, according to the business.

But even so, its full-year profit is still expected to climb 5% to £960m, despite tough trading conditions. That highlights the resilience of the business.

I’m also expecting its share price to be given a boost when interest rates are eventually cut. Inflation has fallen to the government’s 2% target. If it stays there, that means we could see multiple cuts this year that should give consumers more confidence with their finances.

Its share price is up 10.7% this year and 33.7% over the last 12 months. I’m hoping it can carry this momentum into the second half of the year.

Centrica

I’ve also been paying close attention to Centrica (LSE: CNA). Its shares have a P/E ratio of just two. It doesn’t get much cheaper than that.

That’s expected to rise to 7.7 times for 2024 and 10.3 for 2025. But even trading at those valuations I think Centrica would be a shrewd stock to consider.

The business has benefitted in the last few years as energy prices have soared. As prices shot up, so has its share price. But that highlights one risk with the stock: it’s cyclical. On top of that, the energy transition is another threat to consider.

But with over 10m customers, the British Gas owner has a dominant market position. That gives it a competitive edge.

There’s also its 2.8% dividend yield. That’s below the Footsie average. However, with plenty of cash on its books, there’s the possibility it keeps rising. Last year, the firm increased its payout by 33%.

It hasn’t posted the strongest performance this year and its share price has pretty much flatlined, rising just 0.4%. But up 16.5% over the last 12 months and 61.1% in the last five years, I’m strongly considering snapping up some shares.

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.

Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

More on Investing Articles

Investing Articles

I reckon these 2 penny shares are hidden gems worth a closer look!

Some penny shares are well-known, whereas many others go under the radar, but that doesn’t necessarily mean they aren’t potentially…

Read more »

Investing Articles

Just released: our 3 best dividend-focused stocks to buy before August [PREMIUM PICKS]

Our goal here is to highlight some of our past recommendations that we think are of particular interest today, due…

Read more »

Investing Articles

2 FTSE 100 shares with blockbuster yields investors should consider buying

Our writer has noticed that these FTSE 100 shares offer mammoth dividend yields, and reckons investors should take a closer…

Read more »

Stack of British pound coins falling on list of share prices
Investing Articles

Down 36% and yielding 7.8%, is this FTSE 250 share a bargain?

Christopher Ruane looks at a FTSE 250 share with a sizeable dividend yield and a recent record of dividend growth.…

Read more »

Investing Articles

Is Barclays one of the FTSE 100’s best bargain stocks?

Right now, Barclays' shares are cheaper than those of FTSE 100 rival stocks Lloyds and NatWest. So should I buy…

Read more »

Happy young female stock-picker in a cafe
Investing Articles

Is a takeover offer about to boost the Rentokil stock price, and should I buy?

The Rentokil share price is up 10% on takeover rumours. Is it a stock to buy or one to be…

Read more »

Investing Articles

Here’s my Rolls-Royce dividend forecast for 2024-27!

Our writer considers whether the Rolls-Royce dividend might be reinstated in coming years, based on financial performance and stated payout…

Read more »

Investing Articles

What would I do if Rolls-Royce shares plunged 50%? History suggests a big decline is coming

While Rolls-Royce shares have delivered massive outperformance in recent years, they also have a history of significant declines.

Read more »