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These FTSE 100 shares are down 50%. Here’s why I’d buy them

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A 50% fall is a big drop for a FTSE 100 share. It would normally suggest a disaster scenario is likely. However, there’s also another possibility — the coronavirus stock market crash may have gone too far.

Both of the FTSE shares I’m going to look at today have seen share price falls of at least 50% during the last six months. I think they’re now too cheap to ignore.

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Travel bans won’t last forever

Bournemouth-based engineering group Meggitt (LSE: MGGT) has seen its share price fall by 57% so far this year. That’s more than double the 24% fall printed by the FTSE 100.

You might think this is a good reason to avoid this firm, which makes systems for the aviation, defence and energy sectors. However, I think this could be a buying opportunity. I expect this FTSE 100 firm to be a strong performer in a recovery, thanks to the essential services it provides for airlines and the military.

According to the firm, 80% of military fighter jets use its wheel and brake systems. Its products are also installed in “almost every jet airliner, regional aircraft and business jet in service”. Many of these parts are safety-critical, meaning that maintenance can’t be skimped.

But right now, most of these aircraft are standing idle on the ground. Because aircraft service schedules tend to be measured in flying hours, this means that maintenance activity is reduced.

However, this situation won’t last forever. At some point flying will resume. When it does, Meggitt’s products and services will be needed again.

Chairman Sir Alan Rudd spent nearly £500k buying this FTSE 100 share at 485p in early March. The Meggitt share price is much lower now, at around 275p. This values the stock at less than eight times 2021 forecast earnings. I rate the shares as a buy at this level.

This FTSE 100 share is priced for disaster

The Centrica (LSE: CNA) share price has fallen by 60% so far this year and by 85% over the last five years. To me this suggests the market has given up on this FTSE 100 stock ever returning to a normal valuation.

This view could be correct. Centrica might be heading for failure. Customer bad debt is expected to rise as a result of Covid-19 and the group’s US business is also facing short-term headwinds.

Personally, I think this doomsday scenario is unlikely. British Gas remains the largest electricity and gas supplier in the UK, with more than 9m customers and a very well-known brand. The firm is also making steady progress expanding into services such as providing smart home devices and boiler servicing. I expect this service-led growth to improve profit margins.

Newly-confirmed chief executive Chris O’Shea has been forced to delay plans to sell the group’s nuclear power stations and its oil and gas business, Spirit Energy. But I’m sure these deals will be done eventually, freeing up cash and supporting a reduction in net debt.

At around 35p, Centrica shares are now valued at just 0.08 times 2019 sales. By way of contrast, the figure for rival SSE is 1.8 times sales. For National Grid, it’s 2.1.

These businesses aren’t an exact match with Centrica. But I’m convinced that the owner of British Gas offers good value at current levels. I expect this FTSE 100 share to double or even triple in value over the next few years.

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Roland Head owns shares of Centrica. The Motley Fool UK has recommended Meggitt. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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