I’m building a shopping list of the best cheap FTSE 100 shares to add to my portfolio. Here are two I’ll seek to buy if I have spare cash to invest.
Fresnillo
Despite recent rises, the Fresnillo (LSE:FRES) share price still looks dirt-cheap at current levels. Today, the Mexican miner trades on a forward price-to-earnings growth (PEG) ratio of just 0.5.
Any reading below 1 implies a stock is undervalued.
I think buying the precious metal producer to hold for the long haul could be a good idea. This safe-haven stock could limit falls across my investment portfolio if economic crisis occurs and broader financial markets sink.
What’s more, I think snapping up Fresnillo could be a top purchase right now. This is because prices of gold and silver are heading through the roof.
World Gold Council data shows that gold-backed exchange-traded funds (ETFs) recorded inflows of 32 tonnes in March. This was the first inflow for 10 months and indicates a possible sea change in investor appetite for precious metals.
Various factors remain in play that could drive metals prices still higher. These include lower treasury yields, a weaker US dollar, and persistent worries over global economic growth and the banking sector.
I think Fresnillo is an attractive way to get exposure to gold and silver too. Production problems are an ever-present threat to mining businesses, including this one. But its huge portfolio of assets helps to spread the risk (it has seven operating mines across Mexico).
Vodafone Group
Vodafone Group (LSE:VOD) also exposes investors to particular risks. The European marketplace in which it trades is congested. And waves of consolidation across the industry will throw up extra challenges for the FTSE firm to contend with.
The business is also being hit by changes to broadband regulations in Germany. In fact, service revenue declines are accelerating here as changes make it easier for customers to exit their contracts.
Yet I still believe Vodafone shares are highly attractive today. It’s recently signed a joint venture with Altice to stop the rot in its German market. And as one of the world’s biggest telecoms businesses, it has the financial clout to keep heavily investing in fast-growing areas like 5G. This could give it the edge against its competitors.
I particularly like this blue-chip share because of its excellent record when it comes to dividends. Its exceptional cash generation means it’s long paid dividends comfortably ahead of the FTSE 100 average.
On top of this, the business has also sold assets to boost its balance sheet, giving shareholder payouts an extra boost. More units could be on the chopping block too, with reports swirling last week that the telecoms giant could consider selling its Spanish operations.
Today, Vodafone shares carry a juicy 8.6% dividend yield. They also trade on an undemanding price-to-book (P/B) ratio of 0.5 times, below the industry average of 1.6 times.
At current prices I think the telecoms titan is a top value stock to buy.
