There’s nothing I like more than a really cheap FTSE 100 value stock that looks like it’s on the brink of recovery. It gives me the chance to get in at a reduced price, then cross my fingers and hope it flies. These two look stunning value today but only one is heading in the right direction. Can the other crack on as well?
Bunzl could be brilliant
Let’s start with the one that’s showing signs of life, distributing and outsourcing group Bunzl (LSE: BNZL). If it’s an unfamiliar name, that’s because it does the low-key job of selling all the bits and bobs that businesses need to keep functioning, from disposable coffee cups to rubber gloves and cleaning equipment. But it’s turned this into a £6.7bn global business through smart and aggressive acquisitions.
Bunzl boasts a fabulous track record of increasing shareholder payouts every year, stretching back more than three decades. I had it on my watchlist for years, hoping for a decent entry point. Then last year it issued a profit warning, following slowing revenues in the US.
The shares plunged by a third and I bought them on three occasions. They’re still down 36% over 12 months but now they’re starting to show signs of life, up 7% in the last month. I’m almost back to break-even point and hoping for a lot more excitement ahead.
Of course, it’s not a done deal. My big worry is that the US economy will continue to struggle, and the board has work to do widening margins. But with a lowly price-to-earnings (P/E) ratio of 10.9, I think Bunzl shares are still well worth considering. The trailing yield has crept up to almost 3.5% too.
Bunzl has another advantage. Investors are panicking over any stock that might be hit by the artificial intelligence revolution. Until AI can replace the disposable rubber glove, Bunzl looks safe.
JD Sports is slow out of the blocks
JD Sports Fashion (LSE: JD) is another FTSE 100 stock I was watching for years. I spotted my chance in January 2024, as the shares plunged following a disappointing Christmas. JD was extending its footprint in the US, via the $1.1bn acquisition of US sportswear rival Hibbett, and I thought this was a brilliant opportunity to buy it at a bargain price. Sadly, I jumped too soon.
Christmas 2024 was poor too, and last Christmas wasn’t much better as US consumers continued? to feel the burn, as did key JD partner Nike.
The JD sports share price is now down 56% over three years, but the pace of descent has slowed, falling just 4% over 12 months (personally, I’m down 20%). The shares look insane value with a P/E of just 6.3, and any data showing a recovery in consumer confidence typically triggers a spike. So far, they’ve always retreated afterwards.
My big worry is that young people will have less money to spend on trainers and sportswear, with unemployment high and AI menacing entry-level jobs. But I still think JD Sports is worth considering for investors who believe the global economy is heading for brighter days. Patience is required though.
