Extreme stock market volatility represents a top buying opportunity for savvy investors. Lots of UK shares are trading for next-to-nothing on the FTSE 100 alone. This gives individuals a chance to supercharge their long-term returns by buying low today and selling much higher later on.
The FTSE index has fallen a whopping 6% from its September highs of a fortnight ago. And the panic has seen top-quality stocks sold alongside more vulnerable, highly cyclical companies.
Here are two great shares I think could be too cheap to miss. They trade on rock-bottom price-to-earnings (P/E) ratios and one boasts market-beating dividend yields.
Should you invest £1,000 in Anglo American right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Anglo American made the list?
Taylor Wimpey
Housebuilder Taylor Wimpey (LSE: TW) is a stock market bargain that I already own. And despite the rising dangers it faces from interest rate hikes, I’m tempted to buy some more.
Heavy share price falls means it trades on a forward P/E ratio of 4.6 times today. Its dividend yield meanwhile has shot to 10.1%.
The collapsing pound, and fears of higher inflation due to the government’s planned tax cuts, mean that interest rates could soar. The market is increasingly expecting the Bank of England benchmark to move to around 6% next year, up from current level of 2.25%.
This has the potential to sink homes demand as buyer affordability is rattled. Analysts at Credit Suisse warn that home prices could collapse between 10% and 15% in this scenario.
It’s my opinion though, that Taylor Wimpey’s slump to seven-and-a-half-year lows this week (to below 90p per share) reflects this threat.
Besides, as a long-term investor, I still find the company’s profits outlook beyond 2022 and 2023 highly attractive. The supply-and-demand imbalance that’s powering home prices steadily higher (they increased 8.7% in September) should return in force due to persistently weak housebuilding activity.
That’s assuming home sales sink in the first place which they may not. That September home price data shows how resilient the housing market has remained in spite of the cost-of-living crisis and repeated interest rate rises.
JD Sports Fashion
Retailer JD Sports Fashion (LSE: JD) has collapsed due to fears over declining consumer spending and accelerating cost inflation. In fact, it’s the third-largest faller on the FTSE 100 over the past week.
As a consequence, JD now trades on a forward P/E ratio of just 8.4 times. I think this is terrifically cheap given the company’s ongoing resilience (revenues rose 12% between February and July despite the cost-of-living crisis).
Robust trading reflects rock-solid demand for athleisure (sports fashion) goods and the exceptional brand power of the products the company sells. Nike, Adidas trainers and hoodies and the like still sell strongly even when economic conditions worsen.
I’d buy JD Sports shares too as the athleisure market is tipped to keep rapidly expanding. Some are even tipping annual growth of 9.9% through to 2028. This could help the company’s shares rebound strongly from their current lows and deliver fat investor profits.
