These FTSE 250 stocks are so cheap I’m thinking of adding them to my shares portfolio. Both trade on a price-to-earnings (P/E) ratio inside the value benchmark of 10 times and below.
Centamin
Price: 77.3p per share
P/E ratio: 9.8 times
Gold prices are caught in a crosswind right now. On the one hand, fears of sustained high inflation and broader concerns over the economy is supporting demand for safe-haven gold. However, the threat of further severe interest rate hikes is pulling precious metals prices in the other direction.
I still think buying gold mining stocks is a good idea today though. And I think investing in Centamin (LSE: CEY) specifically is an attractive way for me to do this. This FTSE 250 share offers excellent all-round value with its sub-10 P/E ratio and giant 6.1% dividend yield.
It’s my opinion that central banks aren’t effectively taming the problem of runaway inflation. And I believe this could remain the case as the war in Ukraine rolls on and Covid-19 cases spike again in key regions.
The Federal Reserve, for instance, has continued aggressively hiking rates in recent weeks. Yet the rate of inflation continues to handsomely beat economist expectations. Indeed, consumer prices in May rose at fresh 40-year highs of 8.6%.
I’m also not convinced central banks worldwide will be able to keep tightening policy as economic growth cools. This could give gold prices licence to soar to new record peaks.
I’d prefer to buy a gold mining stock rather than the metal itself, or a metal-backed financial product like an ETF. This way I can also receive dividends like the large ones Centamin is predicted to pay out. I’d buy the business despite the ever-present threat of mine production issues that could damage company earnings.
Babcock International Group
Price: 349p per share
P/E ratio: 9.8 times
Cost inflation is a problem that could plague profits growth at Babcock International Group (LSE: BAB). But I’d still buy the FTSE 250 firm as global defence spending accelerates.
This business provides a wide range of products and services across air, land and sea. Its expertise includes servicing army vehicles, providing flying training, and building ships for the Royal Navy. In my opinion, it can expect to get much busier as the geopolitical landscape becomes frostier.
Babcock is boosting its exposure to so-called focus markets to capitalise on rising military budgets too. In March, it spent £32m to acquire the remaining interest of its Naval Ship Management joint venture that provides support to Australia’s maritime force.
Worldwide defence spending broke the $2trn barrier for the first time in 2021, according to the Stockholm International Peace Research Institute.
Events since then, including Russia’s invasion of Ukraine and Chinese military exercises in the Taiwan Strait, have boosted the argument that arms spending will continue to grow. In this environment, owning Babcock shares could be a good investment idea for me.
