If you like buying shares at bargain prices, these two dirt-cheap FTSE 100 stocks merit close examination. Both have been hammered in the stock market crash. Both are flying today, their share prices up more than 10%.
If you are on the hunt for dirt cheap FTSE 100 shares, these two look tempting buys, provided you take a long-term view.
The Pearson (LSE: PSON) share price is the fastest climber on the FTSE 100 this morning, leaping 12% on reports that activist investor Cevian Capital has bought a 5.4% stake in the education company. It has spotted “numerous operational and strategic opportunities to maximise shareholder value,” following years of struggle and disappointment.
Benefit from the stock market crash
Pearson’s stock was in long-term decline following a series of profit warnings, and is down 65% over five years. Its US educational business has been hammered by the shift from print to e-books. When I last examined the stock in February, I was in no rush to buy. Today’s positive news and its dirt-cheap stock price change that.
The group is looking for a new chief executive to replace the departing John Fallon, who was in the post for seven years. Stockholm-based Cevian wants a say in his successor. Investors are hoping this marks the start of a turnaround, but overhauling the company will take time.
I love dirt-cheap FTSE 100 stocks
In February, I questioned the wisdom of Pearson’s planned £350m share buyback. That has now been suspended but the group stood by its final dividend in April, and currently yields 3.38%.
It is offering free online digital courses for the furloughed and self-employed, hoping to boost its crucial online learning division in the longer run. A post-pandemic shift to digital learning could power sales and offset declines in its traditional business. Success is never guaranteed, but this dirt-cheap FTSE 100 opportunity is worth a closer look.
I’d buy into the Informa share price
Today, events and information group Informa (LSE: INF) warned revenues could fall by almost a third in 2020, with £300m worth of events cancelled. In normal times, that would have sent the Informa share price tumbling, but today it is up 10%.
Investors were encouraged by reports that events are picking up in China, with second-half trade show activity encouraging. The FTSE 100 group cautioned that lifting restrictions will be “patchy and slow” though. Its biggest market, the US, is unlikely to restart until September.
Investors have been cheered by news that Informa has identified £400m of cost savings, due to cancelled events and its pay and recruitment freeze. Its subscriptions and drug development operations are doing well, confirming my faith in this affordable FTSE 100 stock opportunity.
The group has also scrapped its dividend while strengthening its balance sheet by raising £1bn from shareholders. I regularly urge investors to buy top FTSE 100 stocks that have fallen hard in a stock market crash. Well, here’s one. Informa’s share price is 44% down this year and looks a top long-term buy and hold to me.
Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Pearson. 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.