Due to runaway inflation and rising interest rates, the outlook for many UK shares has dimmed in 2022. This makes it more challenging to find the best stocks to buy.
Having said that, recent stock market panic means that many top-quality British stocks have been unjustly sold off. The result is that many companies with good long-term outlooks now trade at a discount.
Here are three FTSE 100 bargains on my shopping list today.
BAE Systems
I’d buy BAE Systems (LSE: BA) to capitalise on rising defence spending over the next decade.
Russia’s invasion of Ukraine, and Chinese military drills around Taiwan, have upset the geopolitical balance this year. As a consequence, traditional allies in the West are taking steps to upgrade their militaries.
UK defence spending alone is set to double to £100bn by 2030, it’s been announced. In this landscape, BAE Systems should see demand for technologies like its jets, ships, and drones rise strongly. I’m expecting it to thrive despite the threat of supply chain problems in the near term.
At 845p per share, it has a P/E ratio of 16.1 times. This isn’t that cheap on paper. But I think it represents fantastic value given the manufacturer’s rapidly-improving sales outlook. JP Morgan has just slapped a £10 price tag on its shares.
JD Sports Fashion
Sports and athleisure retailer JD Sports Fashion (LSE: JD) on the other hand trades on a rock-bottom P/E ratio of 8 times. This is comfortably within the accepted bargain benchmark of 10 times or less.
Its low valuation reflects the twin pressures of sinking consumer spending power and rising costs. But it fails to reflect the sportswear giant’s bright long-term outlook in my view. I expect JD’s share price to recover strongly from current levels.
The activewear segment is still tipped for spectacular growth (analysts predict a global market worth $385bn by 2032, up 83% from current levels). And JD Sports has the brand power to make the most of this opportunity.
It also has an excellent e-commerce platform, giving it the means to exploit the digital shopping boom.
National Grid
I’m also thinking of buying National Grid (LSE: NG) shares to provide me with lifelong passive income.
Today the power transmission business trades on a forward P/E ratio of just 13.9 times. It’s a reading I believe fails to fully value the firm’s excellent defensive qualities. The essential service it provides ensures reliable earnings regardless of economic conditions. National Grid also has a monopoly on what it does.
As I say, I also think it’s one of the best stocks to buy because of its excellent dividend potential. Today it offers huge dividend yields of 5.9% for this year and 6.2% for next year.
And despite the huge costs of maintaining the power grid I expect it to continue paying good dividend yields over the long term.
