FTSE 100 shares have been on a wild ride in August. They’ve recovered strongly after a dip at the start at the month, and further gains could be around the corner.
I feel that now’s a great time for investors to look for bargains to consider buying. Cheap shares have even greater potential to rise at the end of 2024 and beyond as investor interest in value shares heats up.
Here are three of my favourites from the Footsie index right now. As you can see, each trades on a rock-bottom price-to-earnings (P/E) ratio. They also all carry a juicy dividend yield.
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| FTSE 100 stock | Forward P/E ratio | Forward dividend yield |
|---|---|---|
| WPP (LSE:WPP) | 7.8 times | 5.4% |
| Rio Tinto (LSE:RIO) | 8.4 times | 6.8% |
| Aviva (LSE:AV.) | 10.9 times | 7% |
WPP
WPP’s low valuation chiefly reflects weak advertising spending in the US tech sector. Sales have fallen of late and could remain weak if recession hits the States.
But as a long-term investor, I think 2024’s share price drop represents an attractive dip-buying opportunity. Given the ad agency’s huge investment in digital advertising — along with its growing emerging market exposure — I think earnings could soar from current levels over the next decade.
I also like the company because of its excellent relationships with global blue-chip companies. Today, it counts more than 300 members of the Fortune Global 500 as clients.
WPP’s net-debt-to-EBITDA multiple, at 1.8 times, is fractionally above target. And this is of some concern to me. But, on balance, I still think it’s worth close attention at today’s prices.
Rio Tinto
Miners like Rio Tinto are also highly sensitive to economic conditions. In this case, a fresh downturn in the US and China could savage commodities demand and push metal prices to the downside.
But, like WPP, this UK share has considerable investment potential over the long term. As a major provider of industrial metals like copper, lithium and iron ore, it’s in great shape to exploit several big growth sectors like renewable energy, construction and information technology.
I’m also encouraged by Rio Tinto’s solid balance sheet. Its net-debt-to-EBITDA ratio was 0.6 at the halfway point of 2024. This, in turn, gives it the firepower to develop new and existing assets and make acquisitions. It spent $800m on new copper and aluminium assets last year alone.
Aviva
Aviva’s also vulnerable to the broader economic landscape. On top of this, it has to work hard to grow earnings in what’s a highly competitive marketplace.
But I’ve still added more Aviva shares to my portfolio in 2024. And I’d like to add more. That’s because the insurance and retirement products provider has an excellent opportunity to grow earnings. This is thanks to demographic changes across its UK, Irish and Canadian territories.
I also like this particular company because of its sprawling general insurance division. This non-cyclical unit helps to limit profits weakness during tough times.
With Aviva also beating its rivals in terms of digital investment, I think sales here could soar over the next decade, perhaps longer.
