After a sell-off at the end of last week, the FTSE 100 clawed higher on Tuesday to reach 5,849. In such uncertain political and economic conditions, nobody knows what a new day may bring for the stock market.
You may be wondering, why anyone would want to put money into such a volatile market at the moment, After all, it’s impossible to predict whether share prices will rebound or plummet over the coming weeks and months.
While I’m aware that, in the short term, the market looks set to be plagued by volatility, I think it may be an ideal time for investors to grab a selection of cheap FTSE 100 stocks. Hold these for the long term, and your prospects of getting rich and retiring early greatly increase in my opinion.
Cheap FTSE 100 stocks
As a result of the stock market crash, a handful of top FTSE 100 stocks look like bargains to me. Especially relative to their pre-crash valuations.
Consider insurance provider Aviva. Despite posting record operating profits in early March, the company’s share price has taken a tumble in the market crash. Since mid-February, it has plummeted by around 42%. It means the shares now trade at a price-to-earnings ratio of 3.5. To me, that indicates a ridiculously low stock price relative to the group’s earnings.
Shares in aerospace and defence giant BAE Systems also offer great value in my view. The company, which trades on a price-to-earnings ratio of around 10, announced last month that Covid-19 had no material impact on business during the first quarter of 2020. That said, it’s likely to be a different story for the rest of the year. However, I’m confident earnings will recover quickly in 2021 owing to the resilience of the defence industry.
Bad news for income investors came when oil and gas ‘supermajor’ Royal Dutch Shell announced a historic cut to its dividend. In March, the company’s share price hit a low not seen since 1995. That said, I think shares in Shell, which currently trade at a P/E ratio of 7.9, are still attractive. Rising oil prices, combined with a brighter macroeconomic outlook, could spark a share price bounce-back and a swift resumption of dividend payments.
Finally, I think shares in property stocks such as Taylor Wimpey and Persimmon offer significant value, with respective P/E ratios of 7.4 and 8.2. With a phased return to construction in sight, I expect both companies’ share prices to fare well if the market rebounds. That’s provided lockdown restrictions are soon lifted so that business can return to usual.
Get rich and retire early
Ultimately, when it comes to investing in this stock market crash, my focus is on companies that have the potential to increase earnings and consolidate their market position over the long-term.
That way, you’ll be set to benefit from share price appreciation as well as eventual dividend payments. This should allow you to build wealth over time and help you to achieve financial freedom.
Finally, in my view, a portfolio that includes a mixture of dividend and growth stocks massively boosts your prospects of getting rich and retiring early. So, if you have spare cash to invest, these cheap FTSE 100 stocks could be an ideal starting point.
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Matthew Dumigan 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.