The FTSE 100 continues to struggle for grip around the 7,000-point marker as we exit May. Investor appetite for UK shares remains weak as concerns over rocketing inflation — and whether or not this could lead to huge monetary tightening by central banks — persists.
I for one don’t plan to stop buying stocks for my Stocks and Shares ISA. In fact I think some UK shares are too cheap for me to miss right now. Here are two from the FTSE 100 I’d buy in June.
A FTSE 100 returnee
I believe grabbing a slice of Royal Mail (LSE: RMG) is a great idea as e-commerce goes from strength to strength. Sure, earnings at Britain’s oldest courier are expected to fall around 1% this fiscal year (to March 2022). But this is unsurprising given that the Covid-19 lockdowns that lit a fire under online shopping in the past 15 months look set to end.
Make no mistake: internet shopping volumes are likely to keep growing and growing as technology evolves, companies supercharge investment in e-retail, and consumer habits continue to shift. It’s why I own UK logistics and warehousing shares Clipper Logistics and Tritax Big Box REIT, along with FTSE 100 packaging supplier DS Smith.
Of course Royal Mail — which has just been shuffled back into the FTSE 100 — is another great way to exploit this theme, I feel. It supplies critical distribution services not just in the UK, but across Europe and the US too. Today the company changes hands on a forward price-to-earnings (P/E) multiple of below 12 times. Okay, Royal Mail faces colossal cost pressures as it transitions from letter deliveries to the booming parcels market. But I still think it could deliver excellent shareholder returns in the near term and beyond.
I also think HSBC Holdings (LSE: HSBA) shares look cheap right now. City analysts think the Asia-focused bank will record a 172% earnings rise in 2021. This results in a rock-bottom forward price-to-earnings-growth (PEG) ratio of 0.1, way below the bargain-benchmark of 1. On top of this, a prospective 3.8% dividend yield beats the broader 3.5% average for UK shares by a decent margin.
HSBC has some obstacles to overcome in the near term. The most problematic of these is arguably the prospect of ultra-low interest rates being maintained to help the economic recovery. Still, I’d buy this FTSE 100 share as I think it’s a great way to make money from soaring economic activity in emerging markets. BBVA says that Asia will account for 65% of global growth between 2017 and 2027. This is up from 60% in the 10 years to 2021.
These ballooning wealth levels have led to soaring demand for banking products. And while competition is intense from digital banks, I think HSBC still has the clout to compete against these new kids on the block. Indeed, the steps it’s taking to double-down on Asia — a drive that will see it exit the US — convince me that the bank has a bright long-term future.
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Royston Wild owns shares of Clipper Logistics, DS Smith, and Tritax Big Box REIT. The Motley Fool UK has recommended Clipper Logistics, DS Smith, HSBC Holdings, and Tritax Big Box REIT. 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.