Now’s a great time to buy cheap FTSE 100 shares. Okay, Britain’s premier share index has risen 9% since the troughs of the recent stock market crash. But there are still plenty of brilliant cut-price Footsie shares that are too good to miss today.
Buying low and selling high is what all share investors strive for. It allows us to turbocharge the returns we make on our invested cash. But while scores of Footsie companies are off the lows reached in the immediate aftermath of the recent market crash, some still offer top value. Even those FTSE 100 shares whose prices have rocketed since the depths of the crash remain too cheap to miss. I’m talking about insurance giant Prudential, gambling operator GVC and retailer JD Sports, to name just a few.
A rocketing share that I’d avoid
I’m not convinced that Kingfisher (LSE: KGF) has what it takes to continue soaring in the third quarter, however. This FTSE 100 dividend stock soared 53% in value between April and June, but the storm clouds gathering over the UK retail sector suggest (to me at least) that a share price reversal could be around the corner.
Rocketing demand for DIY and gardening products have helped lift investor appetite for Kingfisher of late. But this uplift is largely symptomatic of millions of housebound Britons using the time on their hands to spruce up their homes. With lockdown measures gradually being lifted and lifestyles returning to normal again, Kingfisher would likely expect sales of its paints, its plants and the like to fall back again.
Buy better FTSE 100 shares
Don’t forget that Kingfisher’s been in the doldrums for years now. A botched restructuring programme, allied with weak consumer spending in the British Isles and in France, caused its share price to tank by almost 40% during the past three years. These woes could be small-scale compared to what could be coming in a post-coronavirus world though, given the pandemic’s colossal economic impact and its effect on shopper spending power in the months ahead.
Footsie share Kingfisher also needs to weigh the impact that social distancing requirements will have on store footfall, measures that could be here for a long time yet. In 2019, the FTSE 100 business generated less than a tenth of total sales from its online channels. So restrictions on the number of people being allowed in and out of its stores threaten to have a devastating effect on group turnover.
Kingfisher may have rocketed in value following the initial stock market crash. But it still trades on a low forward P/E ratio of around 14 times. Cheap, but not cheap enough to encourage me to invest in July. The risks of a fresh sales collapse are too high in my opinion. So I’d rather invest my hard-earned cash in other low-cost FTSE 100 shares today.
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Royston Wild owns shares of Prudential. The Motley Fool UK has recommended Prudential. 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.