Although the FTSE 100 looks even better value after its recent falls (it is down almost 3% in the last month), it has not been expensive all year. Indeed, although many investors were calling for a ‘correction’, the FTSE 100 offered extremely good value for money even before the recent fall. For example, it has traded on a moderate price to earnings (P/E) ratio throughout 2014, with it currently being 13.2, and on this metric has been significantly behind its US counterpart, the…
Although the FTSE 100 looks even better value after its recent falls (it is down almost 3% in the last month), it has not been expensive all year. Indeed, although many investors were calling for a ‘correction’, the FTSE 100 offered extremely good value for money even before the recent fall. For example, it has traded on a moderate price to earnings (P/E) ratio throughout 2014, with it currently being 13.2, and on this metric has been significantly behind its US counterpart, the S&P 500, which currently has a P/E of 18.8. That’s 42% higher than the FTSE 100’s P/E.
As a result, there are a number of great value shares on offer in the FTSE 100. Certainly, the FTSE 100 may go lower due to continued uncertainty in Eastern Europe and the Middle East. However, for longer term investors, this could turn out to be a golden opportunity to buy shares in great companies at great prices. Here are three such examples.
Trading on a P/E of 12.6, BHP Billiton (LSE: BLT) appears to offer impressive value for money at present prices. In addition, it also delivers a significant amount of diversity that could prove to be a real asset to investors in future. Indeed, BHP Billiton is the world’s most diversified mining company, with it having operations across the globe and in multiple commodity markets. As such, it could prove to be more stable than many of its peers, with a yield of 3.9% helping to smooth out any fluctuations in its returns over the medium to long term.
Although Barclays (LSE: BARC) continues to experience challenges in the form of allegations surrounding its dark pool trading activities, the bank is all set to deliver strong growth over the next couple of years. Indeed, Barclays is forecast to grow its bottom line by around 25% next year and, despite this, shares in the bank currently trade on a P/E of just 9.9 – that’s 25% below the FTSE 100’s P/E. Furthermore, dividends per share are due to increase rapidly over the next couple of years, with Barclays forecast to yield a highly attractive 4.7% next year. This, combined with strong growth prospects and a low valuation, makes Barclays a top notch buy at present prices.
The supermarket sector is clearly experiencing a highly challenging period at present. Indeed, Morrisons (LSE: MRW) is at the sharp end, with profit due to halve in the current year as the company embarks on a price war to try and win back core customers. However, Morrisons has the potential for growth with regards to its online and convenience store propositions, as well as an increase in the number of stores in the south east. Together, these developments could make a positive impact on the company’s top and bottom lines.
While Morrisons trades on a P/E of 14.1, its bottom line is expected to increase by 17% next year as its price cutting move down a gear and its online and convenience stores start to make an impact. Therefore, while there will undoubtedly be more lumps and bumps over the next couple of years, Morrisons could be worth buying right now.
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Peter Stephens owns shares of Barclays, BHP Billiton, and Morrisons. The Motley Fool recommends Morrisons.