2 cheap FTSE 100 stocks I’d invest in today

These two stocks in the FTSE 100 (INDEXFTSE: UKX) strike me as criminally cheap, here’s why I’d invest.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The FTSE 100 is known for its high-quality stocks that often tend to be highly priced. However, there are a few stocks that are so cheap and undervalued, I simply can’t ignore them.

These two may be going cheap at the moment, but that doesn’t mean that they aren’t worth your money. I believe that they could be on the rise so would invest now in order to reap the benefits.

Sky-high

International Consolidated Airlines (LSE: IAG) is one of the world’s largest airline groups, being the owner of British Airways and Iberia. IAG is one of the cheapest stocks on the FTSE 100. Could it be the most undervalued company ever?

Last year, IAG’s return on equity was a huge 35%. This is more than just impressive, putting the company in the top 10% of the most profitable public business on the London market. On top of this, city analysts predict a huge €2.3bn net profit for this year. However, the stock has a P/E of just 4.2, 67% lower than the market average.

So what’s going on? Perhaps it’s knee-deep in debt? Nope. In fact, IAG has operating cash levels of 2.43x its total debt. This demonstrates how the company has more than enough cash to cover any borrowings. It seems to me that IAG is criminally undervalued and I think now is the time to buy. It’s not often that I see such a high-performing company priced so low.

The low price could be put down to the unpredictability of airline companies. Fuel costs, interest rates and the threat of strikes can always impact earnings. Such issues explain the low valuation as they mean uncertainty, which investors hate. But that valuation does seem extreme considering IAG’s recent successes.

I’d grab the opportunity with both hands to invest in IAG while it appears to be mis-priced as I feel the low cost could lead to big profits in the future.

Building up

British Land (LSE: BLND) is one of the largest property development and investment companies in the UK. Some 45% of its portfolio is in retail property, which has understandably dragged down the valuation. However, the other 55% of the portfolio provides a much more promising outlook.

The company’s best assets are prime-location London offices, which always tend to be in high demand. Yet the stock is currently trading at a whopping 45% discount to net asset value. However, the current dividend yield of 6.7% makes me very tempted indeed.

The UK property market has looked to be extremely uncertain of late. Although, as the company invests in more stable areas such as flexible workspace and build-to-rent, I see a positive outlook. I think investors will be making a very wise decision to invest in a stock priced so low with a great dividend yield. The next few years may be unstable but I see steady returns in the future.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

fional has no position in any of the shares mentioned. The Motley Fool UK has recommended British Land Co. 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.

More on Investing Articles

US Stock

The Nvidia share price falls! Here’s what I think happens next for the S&P 500

Jon Smith reviews the overnight results from Nvidia and explains why this could stall the S&P 500 performance through to…

Read more »

Investing Articles

Down 15% today, is this FTSE 100 share too cheap for me to miss?

JD Sports' share price has tanked after the FTSE 100 share released another profit warning. Is this the opportunity I've…

Read more »

Investing Articles

Up 8% today, is this FTSE 100 growth stock a slam-dunk buy for me?

Halma's share price is soaring thanks to another headline-grabbing trading update. Is the FTSE 100 stock now too good for…

Read more »

Investing Articles

With a P/E ratio of just 10.5 is now a brilliant time to buy a cut-price FTSE 250 tracker?

Harvey Jones says a recent dip in the FTSE 250 leaves the index trading at bargain levels. One stock in…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

To build a passive income flow, I’d follow this Warren Buffett approach

Warren Buffett has set up passive income streams most people can only dream about. Our writer sees some practical lessons…

Read more »

Growth Shares

As the boohoo share price falls, could it become a penny stock in 2025?

Jon Smith outlines some of the recent problems involving the boohoo share price and considers if things could get even…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

Here are the worst-performing FTSE 100 shares over the last 5 years

These five FTSE 100 shares have been complete duds over the last half decade. But is there potential for a…

Read more »

Investing Articles

Nvidia stock has tripled this year! Can it keep rising?

Nvidia's latest sales update showed strong growth and the stock's been on a tear so far in 2024. So is…

Read more »