We’re now in the second half of June and therefore I’m thinking about which UK shares to buy in July. I think that some of the best cheap stocks can be found on the FTSE 100 right now. So here are a couple I’m thinking of adding to my own portfolio in the days ahead.
Riding the advertising market recovery
Right now I think BAE Systems (LSE: BA) could be one of the best-valued FTSE 100 stocks to buy. Firstly the defence giant trades on a forward price-to-earnings (P/E) ratio of just 11 times. Secondly, its 4.6% corresponding dividend yield beats the broader average for UK shares by a large margin.
I think BAE Systems is one of most secure defensive stocks out there. This isn’t just because global arms expenditure usually remains robust, irrespective of broader economic shocks. It’s because the tense geopolitical situation right now will likely lead to strong and sustained defence spending. For instance, NATO has taken the unprecedented step of addressing the perceived “systemic challenges” posed by China following the body’s latest summit this week.
The long-term outlook for the BAE Systems share price is clouded by the rise of so-called ethical investing. Studies show how investors are shunning previous favourites like tobacco stocks, based on certain moral principles. While this trend is tipped by many to continue, I think the essential nature of this FTSE 100 firm’s market-leading products means its share price should still rise in the years ahead.
A ‘safe as houses’ FTSE 100 share?
I’d also buy shares in ITV (LSE: ITV) as conditions in the advertising market rapidly improve. It’s a phenomenon the broadcaster laid bare in its latest trading statement in May. Back then, the company reported a “rebounding” in ad revenues during the first quarter. I’m expecting another bright update when interim results are released on July 28, something which could give the ITV share price further momentum. It’s already up 66% during the past 12 months.
I also like the excellent progress ITV has made in the fast-growing video on demand (or VOD) arena. Digital viewing is the future and the FTSE 100 company saw the number of accounts at its ITV Hub streaming platform rise by 1.6m in the three months to March, to 33.6m. ITV is investing heavily in the content and the functionality of the platform to keep people glued to the service too.
However, a new problem has emerged that could derail the earnings recovery at ITV. Film and television studios are facing huge production equipment shortages that threaten to derail the creation of new content. Such problems at ITV Studios could have big implications for both production and advertising revenues at the FTSE 100 firm.
Still, right now ITV trades on a low forward P/E ratio of 12 times while it boasts a chubby 3.5% dividend yield too. At these prices I still think it’s a highly attractive blue-chip stock to buy.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended ITV. 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.