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2 dirt-cheap FTSE 100 stocks to buy in December

While the FTSE 100 continues to trade close to its all-time high, there are a number of bargain buys on offer. Certainly, the short run could prove to be a challenging time as political risk remains high from Brexit and a new US President. However, for long term investors there continue to be excellent opportunities from high quality stocks which offer wide margins of safety. Here are two such companies which could be worth buying before the end of the year.

Tremendous capital gain potential

Standard Chartered (LSE: STAN) has enjoyed a positive 2016 thus far. Its shares are up 12% since the start of the year and there could be much more to come in 2017 and beyond. A key reason for this is the bank’s near term outlook and its low valuation. Standard Chartered is forecast to record a rise in its earnings of 131% in the next financial year, which on its own has the potential to cause a step-change in investor sentiment. However, when combined with Standard Chartered’s price-to-earnings growth (PEG) ratio of 0.1, it indicates that there is tremendous capital gain potential on offer.

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Of course, Standard Chartered also has growth potential beyond 2017. It is well-placed to benefit from the continued rise in wealth across Asia. The Chinese economy in particular has the potential to provide Standard Chartered with earnings growth as it transitions towards a more focused consumer economy.

Certainly, Standard Chartered’s turnaround has a long way to go. It needs to become increasingly efficient, reinvest for future growth and reduce its cost base. However, given its low valuation and high growth potential, now seems to be a good time to buy it ahead of improved financial performance.

Starting to bear fruit

Like Standard Chartered, RSA (LSE: RSA) has endured a challenging period. However, RSA is also in the process of implementing a strategy which is expected to see its bottom line rise rapidly in future. For example, RSA’s earnings are due to increase by 10% in the current year and by a further 39% next year. This shows that the efficiencies being made are starting to bear fruit. And with RSA trading on a PEG ratio of just 0.3, it offers excellent value for money at the present time.

Looking ahead, RSA’s dividend growth is set to elevate its income status. RSA is likely to become an increasingly popular dividend stock since its shareholder payouts are expected to increase by 41% in the next financial year. This puts RSA on a forward yield of 3.8% and with dividends being covered 2.1 times by profit, there is scope for them to rise at a faster pace than earnings over the medium term.

Certainly, RSA’s near term performance could be volatile due mainly to the risks faced by the global economy. But with a wide margin of safety and a sound strategy, its low valuation carries considerable appeal right now.

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Peter Stephens owns shares of Standard Chartered. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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