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Forget gold! I’d buy these cheap FTSE 100 stocks today to retire early

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Gold has been a winning investment over the last year, rising by more than 30% in 12 months. During the same period, the FTSE 100 has fallen by 25%. Buying FTSE 100 stocks today probably feels uncomfortable. But that’s what gold buyers were saying a year ago, when gold prices had been flat for three years.

I think the tide has turned. In my view, the smart choice is to get out of gold and back into stocks. Today I’m going to look at two FTSE 100 shares that look cheap to me at current levels.

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This FTSE 100 stock could recover quickly

One FTSE 100 stock I think offers decent value at current levels is mining group Anglo American (LSE: AAL). The Anglo share price has fallen by 40% so far this year, leaving it lagging behind the FTSE.

However, the majority of the firm’s operations has not seen any significant impact from coronavirus pandemic and is continuing normally. Although Anglo is exposed to the risk of falling commodity prices, I’m starting to think this FTSE 100 stock’s current valuation could be a good level at which to invest.

I’m also attracted to the group’s mix of assets. Alongside its copper, nickel, coal, and iron ore mines, Anglo owns the De Beers diamond business. It’s also one of the world’s largest producers of platinum and palladium.

Demand for diamonds is down at the moment. So is demand for platinum and palladium, which are used in automotive catalytic converters. But an economic recovery could stimulate a strong recovery in demand.

At around 1,300p, Anglo shares trade broadly in line with their book value and on a multiple of less than 9 times forecast earnings for 2020. The stock also offers a forecast a dividend yield of nearly 5%.

Although it could still be a little too soon to invest, I think this FTSE 100 stock could offer decent value for long-term investors at current levels.

This 8% dividend looks safe to me

Many FTSE 100 stocks have already cut their dividends this year.

In my view, there are only a handful of high-yielding FTSE 100 shares that still look safe for income. One of my top picks is Legal & General Group (LSE: LGEN). At the time of writing, these shares offered a forecast yield of 8.9%. I’m fairly confident this will be paid in 2020.

In a statement on 3 April, the firm said that it enjoys “robust” solvency and recognises the importance of the dividend to investors, including many pensioners. Unlike rival banks and insurers, Legal & General intends to pay a final dividend for 2019.

I support the board’s position on this. I don’t see any reason why the group’s insurance business should suffer a big hit from the coronavirus pandemic. And I agree that its solvency position is healthy – or at least it was in 2019, when Legal & General generated £1.6bn of surplus cash. That’s enough to cover the dividend 1.6 times.

I think this FTSE 100 stock is probably one of the best buys in the financial sector at the moment. Although the near-term outlook is uncertain, I’m sure this 184-year old business will continue to thrive.

With the shares now trading on just 6.5 times forecast earnings (plus that chunky 8.9% yield), I rate Legal & General as a buy.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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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