5 dirt cheap FTSE 100 shares to buy in an ISA right now?

Looking for cheap FTSE 100 shares? I reckon that covers most of the index at the moment. Today, I examine five on super-low valuations.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Young female business analyst looking at a graph chart while working from home

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Which FTSE 100 shares are the cheapest? The price-to-earnings (P/E) ratio is one common measure. All things being equal, a low P/E is best.

So today I’m looking at some FTSE 100 stocks on very low P/E values.

Would they make a good start to a new Stocks and Shares ISA? Here are five, with forecast P/Es for 2023:

Should you invest £1,000 in ITV 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 ITV made the list?

See the 6 stocks

CompanyRecent price12-month
change
5-year
change
P/E ratio
Barclays152p+7%-28%5.0
Centrica114p+43%-19%5.6
Rio Tinto5,540p-10%+46%6.9
Barratt Developments478p-6.8%-14%7.2
Aviva425p-25%-36%7.8

The lead index tends to have an average P/E of around 14-15 over the long term. So even the most highly valued, Aviva, is still only about half that.

Banking

When a company faces a tough time, its shares should be on a lower P/E value. That just reflects the risk at the time. But to see Barclays on a P/E of only five almost hurts.

Lloyds Banking Group is in a similar state, on a P/E of only 5.6. With inflation, and the gloomy economy we seem to be set for in 2023, the risks to banks are high.

And yes, they should be valued in line with that. But I think these levels are just too cheap.

The same goes for insurance. Aviva has had a bad time for its own reasons, as the board has been working to reshape the firm.

And it also faces a lot of the same financial risk as the banks. But again, I think prices are too low.

Housebuilder

It’s no great shock to see a housebuilder on such a low valuation as Barratt Developments. And that’s after the shares climbed from their 52-week low in October.

The price back then would put the stock on a P/E of under five today.

We have a similar story again here. It’s all about short-term risk, of a property market slump in this case, weighed against our long-term housing shortage.

Housebuilder shares have already bounced back from their lows of last year. But I still see good value.

Cyclical stock

Rio Tinto is one of those cyclical stocks. It slashed its dividend in 2016, and I think the 2023 cash could come under pressure.

But China has opened up after Covid, and I expect global demand for metals and minerals to grow.

Finally, we have Centrica, the owner of British Gas. Centrica shares have been climbing since their Covid crash, but we’re still looking at a very low P/E.

Some of the rise will be down to high gas prices this year, so there’s risk from that effect tailing off in the future. But even with that, the stock still looks cheap to me.

Should I buy?

I already hold shares in banking, insurance and construction. So I’ll probably diversify more instead.

But I can’t help thinking I might do well to buy all five of these FTSE 100 shares and hold. I think I might come back a year from now and see how well I’d have done.

But there are other promising opportunities in the stock market right now. In fact, here are:

5 stocks for trying to build wealth after 50

The cost of living crisis shows no signs of slowing… the conflict in the Middle East and Ukraine shows no sign of resolution, while the global economy could be teetering on the brink of recession.

Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.

Claim your free copy now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan Oscroft has positions in Aviva Plc and Lloyds Banking Group Plc. The Motley Fool UK has recommended Barclays Plc and Lloyds Banking Group Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Older couple walking in park
Investing Articles

Could £300 a month invested in US and UK shares reach a million by retirement?

Could an investor retire with a million pounds just by dedicating £300 a month to US and UK shares? Mark…

Read more »

Young Caucasian man making doubtful face at camera
Investing Articles

Is £800 enough to start an ISA?

Is it worth bothering with an ISA with less than £1,000 to spare? This writer believes it may be --…

Read more »

Investing Articles

3 reasons Tesla stock may be a long-term bargain

This writer is keen to buy Tesla stock at the right price. He doesn't think it's there yet -- but…

Read more »

Investing Articles

Nvidia stock is a lot cheaper than before – or is it?

Nvidia stock has been caught in the whirlwind of market volatility. This writer has been waiting to buy, so might…

Read more »

Top Stocks

3 FTSE stocks Fools are eyeing up for choppy markets

A selection of companies listed on the UK stock market on the watchlists of four Foolish investors.

Read more »

Young Black man sat in front of laptop while wearing headphones
Investing Articles

A £10,000 investment in Rolls-Royce shares last week is now worth this…

Harvey Jones says Rolls-Royce shares couldn't escape the volatility of recent weeks, but wonders if the recent dip is a…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

Prediction: in 2 years these S&P 500 stocks will be much higher than they are today

These two S&P 500 stocks have been beaten down in recent weeks. But Edward Sheldon expects them to move much…

Read more »

Investing Articles

10% yields! Why a volatile stock market is great news for passive income investors

The recent stock market volatility has given passive income investors the chance to earn double-digit returns. But they still need…

Read more »