The shares are currently trading in bearish territory. A value investor like me rubs his hands at the potential of getting my hand on an under-priced stock.

However, I do not believe Kingfisher is one of these. The stock looks like a value trap to me, and here are the reasons why I will avoid buying in this business cycle.

Bearish market for retailers

I would be naive if I did not remind myself of the mid-to-long term outlook for the global economy when making an investment decision. High inflation and interest rate rises create challenging conditions for most businesses. I don’t see these conditions fading anytime soon either.

City economists are similarly pessimistic. A recent analyst note from Goldman Sachs forecast a recession at the end of this year, lasting all the way until 2024.

I am certain that this not ideal for a company like Kingfisher. The company relies on discretionary spending and its products are not essential for everyday life. Therefore, the hit to the business from consumers tightening their belts could hammer earnings for a good while yet. It is something I believe investors have priced into the discounted Kingfisher stock currently. The shares are down 30% year to date.

However, it is not just the Kingfisher share price that I am seeing affected. Other retailers like JD Sports and Frasers have seen an even steeper fall in share price (47% drop).

Ominous sentiment for Kingfisher shares

It must be said, that I discern a more bearish tone for Kingfisher compared to other retail and leisure stocks.

For instance, just last month it was one of the FTSE’s most shorted companies. My intuition tells me the bears are knocking on the door of the Kingfisher share price due to a combination of two things. These are intensifying competition within the DIY retailer sector, as well as some less than enthusiastic commentary from peers. For example, home improvement retailer Wickes recently warned it faces an “uncertain macroeconomic environment“. This came as the company announced weaker sales figures than the year prior.

Future prospects

Certainly, I do not think the discount on the Kingfisher share price represents a bargain. On the contrary, I believe the shares will continue to be beaten down while current conditions prevail.

Kingfisher is not the only retailer that will suffer. The DIY boom has eased, so I expect many of its direct peers to be similarly hit.

I like Kingfisher’s turnaround potential in the event of a growing economy. But, against the current backdrop, I believe the downside potential will be a drag on its valuation. The stock simply poses too much downside risk in the medium-term than my portfolio can tolerate.

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Henry Adefope 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.

Some FTSE stocks attract short-sellers like bees to honey. Think battered cinema operator Cineworld or troubled white goods seller AO World. That said, there are other companies where this kind of attention is arguably more surprising. Let’s look at a couple of examples and see whether there’s a buying opportunity for me. 

Is the purple patch over?

It’s interesting to see Kingfisher (LSE: KGF) so high up the table of most hated stocks. Thanks to the explosion in the popularity of DIY over the pandemic and a very healthy housing market, investors might assume that short-sellers would have no interest in the B&Q and Screwfix owner. Then again, recent share price activity suggests otherwise.

Kingfisher certainly hasn’t had the best of starts to 2022. In sharp contrast to index peers like BT and BP, the valuation here has fallen 10% year-to-date. That’s not nearly as bad as the drops seen in tech companies, but it still implies that some in the market think the FTSE 100 member’s purple patch might be over.

Given the above, it’s clear that next month’s full-year results will receive a lot of attention. Back in November, Kingfisher’s share price wobbled after the company revealed like-for-like sales of £3.2bn in Q3 were down 2.4% compared to the same period in 2020.

Is this indicative of more people spending money on other things they couldn’t do previously? Or is it simply a natural fluctuation in earnings that all companies experience? We’ll find out soon enough.

In the meantime, Kingfisher’s stock was trading on a P/E of 11 as markets opened. It also comes with a 3.7% yield. That looks pretty reasonable to me. As things stand however, I’m content to sit on the sidelines and wait to see just how tricky the last quarter has been. 

Shorting target

Another FTSE share that makes the ‘most hated’ Top 10 list is Domino’s Pizza (LSE: DOM). Again, this seems a bit surprising.

Back in December, the company announced it had reached a resolution to a long-running feud with its franchisees. As part of the deal, Domino’s will invest £20m over three years in stores and online apps. Marketing will also be stepped up.

In return, franchisees are expected to open a minimum of 45 stores per annum in the next three years, test and roll out new tech, and get involved in national promotions.

As might be expected, this news sent the shares sharply higher. Unfortunately, a good proportion of these gains have since been lost. Shares have fallen back 16% year-to-date.

But maybe this selling pressure (and shorter interest) does make sense. Like Kingfisher, the trading tailwind from multiple UK lockdowns is now over. The sharp rise in the cost of living could also be relevant. When times are tough, it seems likely that more of us will shun a takeaway in favour of a cheaper, shop-bought alternative. 

As a side note, Domino’s net debt has climbed significantly in recent years. I’d prefer it to be going in the other direction.

But companies with franchise business models often prove to be great wealth-compounders over the long term. Domino remains a highly-cash-generative business and P/E of 19 is also roughly in line with the company’s average P/E over the last five years.

Domino’s has now been added to my watchlist. I wonder if this attention from short-sellers might prove short-lived.

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Paul Summers 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.

Despite the odd wobble along the way, the FTSE 100 is now up 19% in the last 12 months. Naturally, some of its constituents have done far better. Can this continue in September when results fly in thick and fast though? Here are three companies I’ll be keeping an eye on. 

JD Sports

Having climbed 41% over the last year, shares in sportswear retailer JD Sports (LSE: JD) are now well above their pre-Covid levels. It’s easy to see why. 

Back in July, the company said it had seen good post-lockdown trading. Business was particularly healthy in the US. As such, JD felt comfortable raising guidance on full-year pre-tax profit to “no less than £550m” from £475m-£500m previously. This would represent a 31% increase on that logged for 2020/21. 

Valuation-wise, JD shares trade on 26 times earnings. That’s lower than other shares in the FTSE 100. However, I don’t think it can even be described as cheap, particularly as margins in this business are very average. Overseas sales may also suffer if Covid-19 infections begin rising again. The possibility of brands such as Nike and Adidas trying to lure shoppers to their own sites is another threat.

Interim numbers arrive on 14 September. As good a company JD is, I’ll be watching next month rather than buying. 

Kingfisher

B&Q owner Kingfisher (LSE: KGF) reports half-year figures on 21 September. Unless something has gone seriously awry, these should be very robust. After all, UK lockdowns, a shift in working patterns, and a white-hot house market have all played into the company’s hands.  

A couple of months ago, KGF reported that it continued to see high levels and demand from new and existing customers. As a result, like-for-like sales growth for the first six months of the financial year would now be 22%, rather than “mid-to-high teens.“

Adjusted pre-tax profit would also be in the range of £645m-£660m — a healthy increase from the £580m-£600m previously predicted.  

The question however, is how long will the home improvement boom persist. Having spent so much time inside, I wonder if people will now be more concerned with going on holiday rather than taking on fresh DIY jobs. The arrival of colder weather could also put (external) projects on ice. Factor in tough comparatives and I’m wary of buying now.

Next

Retailer Next (LSE: NXT) is a final FTSE 100 stock I’ll be watching (but not buying) in September. Like the others, shares in the clothing and homewares top-tier titan have done well in the past year. A gain of 31% certainly isn’t to be sniffed at, especially as this still comfortably beats the index.

There’s little doubt in my mind that Next is a quality business. Last year aside, it’s long generated strong returns on capital and high margins. Led by Simon Wolfson, the management team is also top drawer.

Again however, the likely switch to ‘experience’ spending leads me to think that the Next share price may have peaked. Indeed, brokerage Credit Suisse recently said that it expects clothing sales to lag the more general retail revival in the rest of 2021.

Since I already have exposure to the clothing market via a certain AIM-listed giant, Next shares aren’t for me right now. However, I will certainly be scrutinising those half-year numbers when they hit the market on 29 September. 

The post 3 FTSE 100 stocks I’m watching in September appeared first on The Motley Fool UK.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Next. 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.

I tend to avoid buying stock in newly-listed companies. The disastrous Deliveroo IPO showed that IPOs are often priced too high, leaving holders under water from the off. But there are exceptions. The  big jump seen in the Victorian Plumbing (LSE: VIC) share price after its Tuesday IPO showed that.

What is Victorian Plumbing?

Founded in a shed in 1999 by Mark Radcliffe, Victorian Plumbing has grown to become a major online retailer. It sells 24,000 branded and in-house-designed bathrooms and accessories. Selling to both the public and trade customers, the company now operates a 109,000 square foot warehouse in Skelmersdale, Merseyside. It also has a showroom in Formby and a ‘digital growth hub’ in Birmingham.

What most sticks out to me about VIC, however, is that its £850m valuation on admission made it the biggest company to IPO on the Alternative Investment Market (AIM). Thanks to a flurry of trading over the last two days, this market cap has already charged ahead of the £1bn mark!

Victorian Plumbing’s share price sat just below 336p as markets closed yesterday. That’s already a great return for those institutional investors that bought in at 262p a pop.

So, would I buy it?

Would I buy at the current price? Quite possibly. There are many things I like about this company. 

For one, it’s already generating serious money. Revenues of almost £209m were logged in the year to September 2020. This arguably makes the investment case far less risky compared to the average AIM-listed blue-sky stock.

Another attraction is the online-only business model. Multiple UK lockdowns have only served to accelerate the structural shift to digital shopping. VIC is clearly well placed to capitalise on this.  

The growth potential is also pretty compelling. By placing more emphasis on attracting trade customers and growing its European presence as planned, I think Victorian Plumbing might replicate the success of £5bn-cap kitchen supplier Howden Joinery in time.

Knowing that its founder will still have ‘skin in the game’ is another positive. True, Mark Radcliffe’s share ownership will reportedly drop massively from 72% to 46% post-IPO. However, his interests should still be firmly aligned with retail investors like me. Incidentally, it’s worth noting that heavyweights such as JPMorgan are also on the register. 

Priced in?

Nevertheless, there’s no guarantee that the Victorian Plumbing share price will keep rising. Aside from a lack of track record on the market, one needs to bear in mind that the firm is listing at a time when the home improvement industry is conveniently booming. Companies like B&Q owner Kingfisher and Travis Perkins are just two examples of those that have reported strong trading over the last year or so.

Whether this lasts is difficult to say. I certainly wouldn’t be surprised if revenue growth at VIC does moderate over the current financial year as we spend our money on other things post-pandemic. As such, I do question whether now is the right time to snap up its shares. Let’s not forget that every transaction always involves someone who thinks it’s actually time to sell.

Watchlist bound

Victorian Plumbing grabs my interest in a way that other recent IPOs have not. Even so, I’m content to wait for the initial excitement to die down before deciding whether to take a stake. Today, it’s on my watch list. 

The post The Victorian Plumbing share price has soared since its IPO. Should I buy? appeared first on The Motley Fool UK.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Howden Joinery Group. 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.

“A stronger business”

No doubt about it, today’s results from the top-tier member were something for existing shareholders to celebrate.

Sales rose 7.2% on a reported basis to £12.3bn over the 12 months to the end of January. As a sign of just how important it was for firms to have a quality e-commerce offering these days, almost a fifth of these were online transactions  (including Click & Collect). Adjusted pre-tax profit rose 44% to £786m. 

Naturally, this was great news for Kingfisher’s finances. Free cash flow jumped almost 400% to £938m, helping the company to reduce its burden and resume paying dividends. A total payout of 8.25p per share for the last financial year has now been proposed. 

Commenting on today’s numbers, CEO Thierry Garnier said that Kingfisher was emerging from the pandemic as “a stronger business, with an improved competitive position in all key markets, strong new customer growth and a step change in digital adoption”.

As one might expect, the market has lapped this up. Taking into account today’s 6% rise, Kingfisher’s share price is now roughly 160% higher than where it was back in March 2020. That’s a spectacular result for anyone who had the courage to buy when the pandemic first hit.

The question is whether this form can continue. 

Time to sell this FTSE 100 share?

I think there are arguments for and against staying invested in Kingfisher. 

On the one hand, the FTSE 100 stock’s outlook on earnings is encouraging. Today, the £7bn cap stated that it had made a “good start” to its new financial year with demand in the UK and France remaining strong. With the popularity of working from home likely to continue after the pandemic has passed, Kingfisher’s purple patch may just continue. On top of this, I’d also argue that a frothy housing market is likely to have priced some people out of their dream homes. This could make the option of renovating their existing abode more attractive. 

Notwithstanding the above, we need to consider that many people simply can’t wait to get outdoors and spend their money on other things. In such a scenario, it’s travel and leisure-related stocks that will benefit, less so those relating to home improvement. Confirmation that Kingfisher had such a storming 2020 also means that the firm faces tough year-on-year comparables going forward. Throw in some obligatory economic uncertainty as the full impact of the pandemic becomes clear and further significant share price gains look unlikely, in my view.

All told, I’m inclined to think the ‘easy money’ may have already been made with Kingfisher. A P/E of just 13 times forecast earnings suggests that the FTSE 100 member is far from a screaming ‘sell’, but I do think expectations need to be tempered with realism. As such, I’d feel more comfortable investing my money elsewhere in the top tier.

The post Is the rally almost over for this FTSE 100 stock? appeared first on The Motley Fool UK.

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Paul Summers 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.

The following two stocks have now doubled since the lows of March, highlighting the rewards of buying ahead of the inevitable stock market rally.

Home improvements retailer Kingfisher (LSE: KGF) hit a low of 125p a share in March. Today, it trades at 279p. It flew back into the FTSE 100 in June, after crashing out in March. Last week, the B&Q-owner flagged up a 17.4% rise in total like-for-like Q3 sales to £3.46bn, as consumers did up their homes in the coronavirus lockdown. Online sales soared 153% and now represent 17% of total group sales, around double last year’s total.

The pandemic continues to cast a shadow, but this is a strong showing from a retailer in the time of coronavirus. Stores, such as B&Q and Screwfix in the UK, and Castorama and Brico Depot in France, have stayed open due to their essential status. Sales have also been boosted by the work-from-home trend, as people adapt their properties.

Stock market rally opportunity

Kingfisher’s biggest problem right now is fulfilling orders, as supply chains are disrupted by the pandemic. The other threat is people switching spending to entertainment once the economy opens up. But I’m still tempted by the Kingfisher share price, which trades at just 10.1 times forward earnings. The group scrapped its dividend in March, but that will return at some point.

Royal Mail Group (LSE: RMG) crashed out of the FTSE 100 back in December 2018, and has yet to claw its way back. The FTSE 250 group has been heading in the right direction lately though, after outpacing this year’s stock market rally. Coincidentally, it also dipped below 125p in March but, today, it trades at 279p.

Stock markets responded positively to last week’s update, with another rally in the Royal Mail share price even though it posted a £20m group operating loss for the six months to 3o September. That’s down from a £61m profit last year. Investors prefer to focus on the positive, in this case a 9.8% rise in revenues to £5.7bn.

I won’t buy Royal Mail today

Parcel volumes have soared as people shop from home to overtake letters revenues for the first time. Parcels now make up 60% of total revenues, up from 47% last year, and that trend is going to continue. Virus-related measures, such as social distancing at work and staff absence, cost the group money. Hopefully these will ease next year, if those vaccines do their work. Although I’d look elsewhere to play the next stage of the stock market rally.

Royal Mail still needs an overhaul, and initiatives such as reducing management layers will save up to £330m in operational costs. However, the group is still weighed down by its history, and its turnaround will remain slow going.

Trading at 15.1 times earnings, the Royal Mail share price is no longer that cheap. There’s also no dividend today. I’d buy Kingfisher first.

The post These 2 FTSE stocks have made investors rich in the stock market rally. Here’s what I’d do now appeared first on The Motley Fool UK.

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Harvey Jones 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.

This being the case, does it make sense to buy DIY retailer and FTSE 100 stock Kingfisher (LSE: KGF)? Today’s half-year results have certainly led me to modify my view of the company.  

FTSE 100 winner

As expected, the requirement to spend more time at home has proven a great tailwind for the B&Q and Screwfix owner, making it arguably one of the few ‘winners’ from the FTSE 100 over 2020. 

Although sales in Q1 were inevitably hit, the easing of restrictions in Q2 allowed like-for-like sales in the latter to soar 19.5%. Growth was seen in all the company’s operations with the exception of Russia and Iberia.

Unsurprisingly, e-commerce sales boomed. A 164% jump here accounted for 19% of total sales, comparing favourably to the 7% contribution over the same period in the previous year. 

All told, sales fell 1.1% in constant currency over the six month period to the end of July. Statutory pre-tax profit, however, jumped a little over 62% to £398m. Free cash flow also soared over 400% to £1.04bn, partly due to lower capital expenditure. No wonder the shares were up over 7% in early trading. 

But this is the past. What about the future?

Mixed outlook

Today, Kingfisher said that trading in the second half of its financial year so far had been “encouraging” with like-for-like sales up 16.6% to 19 September. As CEO Theirry Garnier stated, the pandemic is “creating new home improvement needs, as people seek new ways to use space or adjust to working from home.”

With suggestions that restrictions could be in place until next spring, this trend looks like it’ll continue for some time to come. Even after being lifted, many of us won’t exactly be sprinting back to the office.

Notwithstanding, the company was keen to state the uncertainty caused by coronavirus limits its ability to provide an outlook on sales for the second half of its financial year. As a result (and in line with other FTSE 100 companies), the interim dividend has been withdrawn and some of the cash has been used to pay down borrowings instead.

Personally, I think this is a great move. Kingfisher’s balance sheet has always been something of a red flag for me. The fact that net debt fell from £2.4bn to £1.4bn by the end of July is pleasing.

Still good value?

Like everything else, shares in Kingfisher plunged back in March when the UK entered lockdown. Since then, they’ve bounced hard. Taking today’s rise into account, they’re now up an incredible 130% since the market crash!

Nevertheless, Kingfisher still doesn’t look excessively priced. A valuation of 14 times forecast earnings before markets opened was pretty reasonable. Of course, the extent to which investors should trust analyst forecasts given the unpredictability of coronavirus is another thing entirely.

For me, however, the deciding factor should be whether you would want to hold the Kingfisher’s shares after the coronavirus has been sent packing. We are, after all, long-term investors here at Fool UK.

If not, there are plenty of other FTSE 100 stocks I’d buy for the long term. 

The post As another lockdown looms, is Kingfisher one of the best FTSE 100 shares to buy now? appeared first on The Motley Fool UK.

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• Want to start buying shares? How good are you at these 3 things?
• How to target a £1,183 monthly passive income in a SIPP for life!
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Paul Summers 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.

Let’s take a closer look at three examples of stocks that investors can’t seem to get enough of.

Fewer claims, higher profits 

Shares in insurer Admiral (LSE: ADM) are up 14% in the last month alone. If you’d bought back in the middle of a miserable March, you’d now be sitting on an even bigger gain of around 43%. 

This popularity isn’t a complete surprise. Last week’s interim results revealed a 31% rise in statutory pre-tax profit to £286.1m. At least some of this is due to the company receiving fewer motor claims in March and April as the UK was forced into lockdown.

Another attraction has been the company’s decision to reinstate its special dividend. The 20.7p per share payout will now be distributed in addition to a half-year dividend of 70.5p. 

Despite its high margins and income credentials, Admiral now trades on a forecast price-to-earnings (P/E) ratio of 20. This makes it significantly more expensive than top-tier peer Direct Line Insurance (13 times earnings).

After such a strong performance, I think the share price might soon pause for breath. 

Lockdown beneficiary

A second stock from the FTSE 100 that’s been doing very well is B&Q and Screwfix owner Kingfisher (LSE: KGF).

A beneficiary of people having (a lot) more time on their hands lately, Kingfisher recently reported a 21.6% jump in like-for-like sales in the second quarter of its financial year (to 18 July).

As a result of this and cost-cutting measures, the company now believes that half-year adjusted pre-tax profit will come in ahead of that achieved last year. 

Unsurprisingly, investors have reacted positively. Over the last month alone, Kingfisher’s stock has climbed 19% in value. If you’d bought when the world was going to hell in a handcart back in March, you would have doubled your money by now. That’s a much better return than the 22% achieved by the index. 

Whether this momentum can last, however, is debatable. With restrictions lifted and people slowly returning to work, the shares may begin to lose steam.

A forecast price-to-earnings ratio of 14 is far from excessive, but with a lot of debt still on the balance sheet, I wouldn’t go chasing the stock from here.

Pride before the fall?

A third FTSE 100 company that’s been doing very well is Ocado (LSE: OCDO). Up 10% in the last month and well over 100% since early March, the online grocery retailer continues to attract momentum-chasing investors. 

Since betting with the trend can often prove a winning strategy, I don’t doubt there’s a chance to still make money with Ocado. Once again, however, I would caution that this company is far from a risk-free bet.

Lockdown helped retail revenue soar by 27% year-on-year in the six months to the end of May but the company is still making a loss. That’s concerning when, at nearly £18bn, Ocado’s valuation is approaching that of FTSE 100 peer Tesco. After all, the latter boasts a near-27% share of the grocery market. There’s also Amazon to worry about. 

The Hatfield-based business will surely benefit from the shift to online grocery shopping. At this price, however, it simply must deliver. 

The post Investors can’t stop buying these FTSE 100 stocks. Should you follow the money? appeared first on The Motley Fool UK.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Amazon. The Motley Fool UK has recommended Admiral Group and Tesco and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. 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.

After months of being stuck at home, people clearly have long to-do lists. Many are heading off to Kingfisher’s retail outlets such as B&Q in the UK, and Castorama in France and Poland. I’m impressed by the scale of the sales recovery, with like-for-likes up 21.8% in the second quarter to 13 June.

Sales have grown more than 25% since the second week of May, a huge relief after the 74% drop in early April. No wonder investors are piling into the Kingfisher share price, which is continuing its impressive recovery from the stock market crash. That’s despite management previously announcing it won’t be paying a full-year dividend.

FTSE recovery play

Today’s final results for the year to 31 January showed a 0.8% drop in full-year sales to £11.5m. Statutory pre-tax profits fell 65.7% to £103m, hit by £441m of exceptional items. These included £118m on store impairments, due to reduced freehold valuations, while its exit from Russia cost a further £130m. That was before the stock market crash though.

Investors are looking to see what’s happening post-lockdown. Healthy sales growth in May continued into June, with its B&Q and Castorama brands enjoying “exceptional demand.”

Kingfisher closed stores at the height of the pandemic but click & collect and home delivery services performed well. Online sales rose sharply with e-commerce growing fourfold since mid-March. This shift could bear long-term fruit as well if more tradespeople and DIY-ers get used to ordering on the web.

I’m delighted to see the dramatic snapback in customer demand. Hopefully, other retail stocks will also recover strongly from the stock market crash.

Stock market crash opportunity

Kingfisher actually fell out of the FTSE 100 in March, as its share price almost halved during the early stages of the crisis. Yet it’s recovered faster than most stocks on the index, even before today. It’s now up almost 65%, measured over three months.

Of course, the ideal time to buy this stock was at the height of the market crash. But if you didn’t manage that, there’s still an opportunity here. I’m not sure how much faith we can put in traditional valuation metrics, such as the price/earnings ratio, but this suggests Kingfisher is still good value at 10.57 times earnings.

Kingfisher is making a welcome shift away from cumbersome, large-scale initiatives, and aims to be more retail-led rather than product-led. This should make the group more efficient, cutting clearance and logistics costs. This overhaul is necessary, as the Kingfisher share price was in steady decline for five years before the stock market crash.

As shoppers return, investors will follow. I’d buy it.

The post Stock market crash survivor! I’d buy this FTSE 100 stock as sales boom after the lockdown appeared first on The Motley Fool UK.

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Harvey Jones 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.

Back in April, the airline stopped offering the FT to passengers because it was reportedly upset with the paper’s coverage. This did little to improve the brand’s reputation among customers and the press. 

All of these factors have had an impact on the stock’s share price, lagging the broader market by 14% over the past 12-months, excluding dividends paid to investors.

Booming profits

However, despite all of the negative publicity, profits have held up relatively well. IAG is expected to report earnings per share of €1.07 this year, a 7.4% dip from last year, but up 20% from 2016’s figure of €0.89.

Barring any more substantial setbacks, City analysts expect growth to return in 2020 with earnings rising 7% to €1.15.

I think this could be a fantastic opportunity for investors to buy into this world-class brand at a discounted price. At the time of writing, shares in the airline group of trading at a forward P/E of just 5.9, a valuation that offers a substantial margin of safety, in my opinion.

The stock also supports a dividend yield of 5.3%, so investors will be paid to wait for confidence to return. Lastly, the payout is covered three times by earnings per share, so there’s a sizable cushion to protect the dividend if earnings fall further. 

New CEO

Another FTSE 100 dividend champion I think’s too cheap to pass up right now is the owner of the B&Q and Screwfix brands Kingfisher (LSE: KGF). The firm has been struggling to grow for the past six years, with revenue for the period expanding at an anaemic 1% per annum. Rising costs have also eaten into the company’s profit margins.

Kingfisher’s operating margin has fallen around 40% since 2014. A transformation plan, which was designed to revolutionise the business for the digital age, has also failed to yield the desired results.

But I think the company’s fortunes could be about to change. At the end of September, Véronique Laury, who has been managing the group since 2015, stepped down and was replaced by Thierry Garnier, a veteran of French retail giant Carrefour.

The new CEO has been quick to make his mark. He’s already replaced the management of Kingfisher’s struggling French business with a former executive at Carrefour’s hypermarkets unit. 

Garnier has also put his money where his mouth is. Soon after coming on board, the CEO splashed out £130k buying Kingfisher shares. The group’s CFO also purchased a similar amount. 

I think it could be worth following Kingfisher’s new CEO as he seeks to turn the business around. Today, you can snap up shares in this retail giant for just 10.3 times forward earnings. The stock also supports a dividend yield of 5%, so you’ll be paid to wait for the recovery. 

The post £2,000 to invest? I’d buy these dirt-cheap FTSE 100 stocks yielding 5% appeared first on The Motley Fool UK.

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Rupert Hargreaves owns no share 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.