In my opinion, the FTSE 100‘s full of bargains at the moment. Here are two I currently have in my Stocks and Shares ISA.
JD Sports Fashion
Two profits warnings in three months have nearly halved the market-cap of JD Sports Fashion (LSE:JD.), the UK’s largest sports/fashion retailer, since its shares reached their 52-week high in September 2024.
The increase in employers’ National Insurance and a “volatile” trading environment in the UK are blamed.
Investors also appear concerned about an over-reliance on Nike, which is experiencing falling sales and trying to reverse the fortunes of its struggling business. JD Sports is the American sportswear giant’s leading global partner. Although unconfirmed, it’s believed that the US brand accounts for around half of its revenue.
But the British retailer has recently completed acquisitions in the United States and Europe. This should help reduce its exposure to a fragile UK economy. In another positive move, in January, the company’s chief executive demonstrated his confidence in the business by spending £99,000 on shares.
And the stock look cheap to me as well. Even at the lower end of expectations, they trade on 6.2 times earnings for the year ending 1 February.
Vodafone
The telecoms giant’s part way through a turnaround plan that’s seen it exit markets in Ghana, Hungary, Spain and, most recently, Italy. The latter deal valued operations in the country at 7.6 times EBITDAaL (earnings before interest, tax, depreciation and amortisation, after leases), the group’s preferred measure of profits.
Apply this to expected (to 31 March) earnings for the remaining Vodafone (LSE:VOD) business and it’d be worth £70bn. That’s four times more than its current (31 January) stock market valuation.
But investors appear concerned about its high debt levels. At 30 September 2024, borrowings were €42.7bn (£35.7bn). And revenue and earnings are falling in Germany, its biggest market.
It also cut its dividend by 50% last May, which didn’t help sentiment. However, the shares still yield 5.5% — although the recent reduction illustrates that payouts are never guaranteed.
And I remain optimistic that changes to the business – including the planned merger of its UK operations with Three – will soon lead to an improvement in the company’s bottom line.
Beauty’s in the eye of the beholder
Just because I believe these two FTSE 100 shares offer great value doesn’t necessarily mean others will agree with me. However, I’m not planning on selling my shares any time soon.
I think successful investing requires taking a long-term (five to 10 years) view. Although sometimes difficult, short-term price volatility should be ignored.
I also subscribe to the theory that investors act rationally. This tells me that apparently cheap stocks in companies with strong brands and an international footprint will not remain in bargain territory for very long.
That’s why I’d like to buy more of both JD Sports and Vodafone when I can and think investors should consider them too.
