FTSE 100 stocks are well represented in my portfolio. Stocks on the lead index trade at multiples considerably lower than their US peers and, as such, it’s possible to find greater value, despite the recent rally.
So let’s take a look at two FTSE 100 stocks I think investors should snap up in March.
Hargreaves Lansdown
Hargreaves Lansdown (LSE:HL) is an investment platform operator. In fact, its stocks and funds supermarket-style offer is the country’s most popular. And as a user of the platform, I think there’s good reason for that.
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Investors seem still a little confused as to what fair value looks like for this stock. The company’s share price surged during the pandemic as thousands turned to retail investing after lockdowns hit.
However, since then, we’ve seen growth slow. Active user numbers have continued increasing, but trade volumes on the platform haven’t grown as some might have hoped.
There are several obvious reasons for this. The economy has reopened and individuals have more to do than watch markets and invest, as they did in 2020. Secondly, we can also assume that the cost-of-living crisis has reduced income for investment purposes.
In its H1 report, Hargreaves demonstrated that the firm was still growing. There were an additional 31,000 new customers and revenue grew 20% to £350m. Revenue gains were driven by higher interest rates on customer deposits.
Higher rates, which will likely have a positive impact for the next couple of years, have essentially mitigated falling investor dealings. And that’s handy as economic issues could prove challenging for business growth over the next year.
But there’s one big long-term trend. Britons are increasingly taking control of their finances and managing their own portfolios. Hargreaves’ supermarket platform provides investors with the ability to do this.
That’s why I recently bought more with the share price falling and the forward price-to-earnings (P/E) around 15. The dividend yield also sits at an index-beating 4.6%.
Airtel Africa
Airtel Africa (LSE:AAF), like Hargreaves, is a stock with greater growth potential than much of the FTSE 100, and trades with a P/E of just eight — superior to the sector average at 14. It also offers investors a dividend yield of 3.3% — not world-beating, but it’s useful.
The firm provides telecommunications and mobile money services in 14 countries in Africa, and is owned by Indian telecommunications group Bharti Airtel.
Airtel’s growth prospects reflect the geographies in which it operates. African nations are among the fastest growing worldwide, and this provides lucrative opportunities for firms willing to operating in this higher risk environment.
The valuation appears more attractive when we use the discounted cash flow (DCF) model. One DCF calculation suggests a fair value of 500p, far above the current 125p. This is why I’m adding it to my portfolio in March.
But, of course, I appreciate the issue with DCF is that forecasting cash flow over 10 years can be challenging, and Airtel Africa is operating in a difficult and changeable market — one that is vulnerable to the current inflationary environment.
