With the FTSE 100 hitting an all-time high this month, it might seem an odd place to hunt for bargains. But I think some lead index shares currently sell at attractive prices, given their prospects.
Here is a handful of such shares, all of which I would happily add to my portfolio next month if I had spare cash to invest.
JD Sports
Activewear and athleisure retail giant JD Sports has been on fire. The company has a long history of growth, but it has set out an ambitious global plan that foresees hundreds of new stores opened annually in coming years, helping to generate double digit percentage revenue growth. I think that could boost profits, although one risk I see is a slow economy leading consumers to spend less.
JD expects headline profit before tax and exceptional items for the year to top £1bn. But its market capitalisation is under £10bn.
I see that as cheap for a proven operator with dynamic growth plans.
B&M
Cost inflation is a risk to profits at retailers including B&M. But I also see it as an opportunity for the discounter. Its price focus could attract new customers at a time when shoppers are trying to keep control of their household budgets.
These FTSE 100 shares are not the bargain they were in October, having since soared 60%.
But the price-to-earnings (P/E) ratio of 13 still looks cheap to me, given the business’s long-term growth potential.
British American Tobacco
A risk that declining cigarette use will hurt profits continues to hang over manufacturers such as British American Tobacco. Yet the firm just keeps on delivering. It announced this month that revenues last year grew 7.7%. Operating profits also grew 2.8% to over £10bn.
However, the company’s large debt pile eats into profits, and I see a risk that could hamper future profitability. But I like the well-run company and its yield of 7%.
The Lucky Strike brand owner extended its decades-long run of annual dividend increases, yet still trades on a P/E ratio of just 11. That looks cheap to me.
M&G
Another high yielder (8.8%) in my portfolio is fund manager M&G. And the company aims to maintain or increase its annual dividend, although that is never guaranteed.
One risk I see is volatile markets hurting earnings. Last year, for example, post-tax profits crashed 92%. But given the company’s proven earnings potential, I see the current price as cheap. M&G has been buying back shares at scale, which I take as a sign of management confidence.
Mondi
Packaging manufacturer Mondi has a P/E ratio of eight. That looks low to me. On top of that I also like the look of its 4.3% dividend yield.
But these FTSE 100 shares have fallen 26% in the past year. Yesterday, the business warned that demand could fall and prices are weakening. The market marked Mondi shares down – which I see as a buying opportunity for my portfolio.
The company is a well-established, large business and has a good position in the global packaging industry. I expect long-term demand in this sector to be high. That should be good for Mondi.
